US Secretary of State Condoleezza Rice has been pressed over claims Iraq's prime minister is shielding officials from corruption investigations.
Ms Rice said wrongly accusing Iraqis of corruption could sour relations
Testifying to a House oversight panel, she was told Iraqi PM Nouri Maliki had issued an order requiring his approval before any top officials were charged.
Ms Rice said the claims were unverified - but added that the US would oppose any policy giving officials immunity.
The panel also queried the oversight of private security contractors in Iraq.
The Oversight and Government Reform Committee of the House of Representatives, under Democratic chairman Henry Waxman, has been keen to question Ms Rice over US operations in Iraq.
Her testimony before the panel came a day after a senior state department official resigned amid heavy criticism of the way foreign private security firms in Iraq are supervised.
Mr Waxman presented Ms Rice with an order apparently from Mr Maliki which, he said, essentially would grant immunity to the prime minister and top officials from corruption charges.
Ms Rice responded that the US did not accept "any policy that would make immune from investigation or prosecution any member of the Iraqi government, no matter how high".
Blackwater provides security to US diplomatic staff in Baghdad
She added: "If there is corruption, the US wants to root it out."
But, she said, to make such unsubstantiated allegations against Mr Maliki "would be wrong" and could potentially damage important US-Iraqi relations.
Mr Waxman, who has criticised the state department for doing to little to curb fraud in Iraq, questioned whether money from cases of corruption might be being used to fund attacks on US troops.
He had earlier suggested that Ms Rice's management of the state department and its actions in Iraq were a "matter of urgent national concern".
Tensions in Iraq have been fuelled by a shooting incident involving private US security firm Blackwater last month, in which 17 Iraqis died.
"We need to know whether the department is capable of real oversight over Blackwater and other government contractors," Mr Waxman said.
"We need to know whether the mistakes of the state department have jeopardised a chance for political success in Iraq."