Two others were injured in the incident in Baghdad’s al Silaikh district.
Three of the dead were children. The mother of the infants, unwounded in the episode, said the driver didn’t see the roadblock, Aljazeera reported.
The US military denied knowledge of the incident.
Separately, US troops shot dead three Iraqis in Saddam Hussein’s hometown of Tikrit, a local hospital chief said.
The US military disputed this saying they had killed only two men both illegal arms dealers.
“There were three killed and five injured including two children,” said Mirza Omar, the chief of the emergency room in the town’s main hospital, as he revised an earlier toll given by the hospital’s director, Dr Salah al-Dulaimi.
“At first, we thought it was more killed because the wounded people who arrived at the hospital told us there were six dead bodies at the market,” Omar said.
US soldiers opened fire on five arms sellers who were test-firing Kalashnikov assault rifles for customers at 0830 (0430 GMT) in the city’s bazaar, Dulaimi told Agence France Presse.
At the hospital, an AFP photographer saw two 10-year-old children who were hit by US gunfire. One was wounded in the chest and the other in the neck.
“They began to pull additional weapons out of the trunk and they became combatants at this point.”
Lieutenant-Colonel Steve Russell
Lieutenant-Colonel Steve Russell, who commands the 1st Battalion, 22nd Infantry Regiment, said his troops opened fire on four men who were selling firearms on the street, killing two.
A third was captured at a hospital where he was being treated for wounds and a fourth, believed also to be wounded, was on the run, he said.
When the four men began unloading weapons and what appeared to be the elements for making bombs from a car, US soldiers opened fire.
“They began to pull additional weapons out of the trunk and became combatants at this point,” Russell said.
Arms for sale
Soldiers who checked the area afterwards found AK-47 rifles, loaded magazines and small arms ammunition “and material that can make up improvised explosive devices, such as wires and switches,” he added.
Three US soldiers were wounded in separate attacks around Tikrit, where the Fourth Infantry is scouring the countryside in a bid to disable Saddam’s support network and find the ousted president.
Two were hospitalised after roadside bomb attacks, and a third was wounded by a mortar round, but returned to duty.
Saddam disappeared when Baghdad fell to US forces on 9 April and has a 25-million-dollar bounty on his head.
The Fourth Infantry arrested 12 Iraqis, including three wanted for attacks, during raids overnight and early Friday, a US military source said.
“Late Thursday-early Friday, we conducted four raids and we detained twelve. Out of these 12, three were former regime loyalists involved with illegal weapons training and organising attacks against coalition forces,” he added.
Two weapons caches were seized, containing a total of more than 100 Kalashnikovs, a dozen sniper rifles, more than 35 rocket-propelled grenades, 23 rockets, 10 mortars and a box of ammunition.