Occupation troops fired shots in the air in the holy, predominantly Shi’i city to disperse hundreds of demonstrators, angry over the killing of a local man.
Marines claimed shots were fired from the crowd.
One of the injured demonstrators said he had been hit with an electric cattle prod. Soldiers arrested several protesters. Clashes erupted with occupation forces, who threw some of the demonstrators to the ground and pointed weapons at them.
The latest killing is likely to raise tensions in the already strained city.
Aljazeera reported that US soldiers shot dead an Iraqi civilian and wounded six others in Karbala late on Saturday.
The killing took place near the Imam Hussein shrine, revered by Shia.
The incident occurred when American troops were providing back up to Iraqi policemen, who were trying to capture so called “armed gangs” selling contraband goods in the area.
Residents of Karbala are apparently upset that occupation troops entered the holy city.
The latest moves are likely to
Discontent is mounting among the Shi’i community, which Washington had regarded a staunch ally in the run-up to the war.
The latest violence coincides with a report that four US soldiers have been charged with abusing Iraqi POWs.
They are now awaiting a decision whether they will be court-martialled, said a US defence official on Saturday.
It is the first time US personnel have been formally accused of mistreating Iraqi POWs since the beginning of the US-led invasion and occupation.
Details of the incident leading to the charges were not released.
Earlier, a US marine was killed in al-Hilla, about 85 km south of Baghdad as occupation troops faced one of the bloodiest weeks since the occupation of Iraq.
The latest death brings the number of American soldiers killed in Iraq within the last 24 hours to five.
Rocket-propelled grenades were fired at soldiers in al-Hilla. On Saturday four US troops were killed in two separate resistance attacks.
Meanwhile, US troops continue to detain our correspondent and cameraman in the northern Iraqi city of Mosul. The pair were arrested as they filmed the remains of a vehicle attacked by American troops.
Cameraman Nawfal al-Shahwani went on hunger strike and was transported to hospital.