Pictures showing what appear to be two dead British soldiers and two prisoners of war have been broadcast on Qatar-based TV station al-Jazeera.
One of the alleged British prisoners of war, shown on al-Jazeera TV
The soldiers were said to have been killed and captured in fighting around the town of al-Zubayr, near the southern city of Basra.
The channel showed two apparently dead bodies in military uniform, lying next to a vehicle on a road, and two live men not wearing uniform, in a room full of Iraqis.
The MoD later confirmed that the bodies were "probably" those of two British soldiers missing in action. Their families have been informed of the development.
They had been classified as missing after their Land Rover was ambushed on Sunday.
Group Captain Al Lockwood said the MoD condemned the decision to broadcast the footage of their bodies.
"We are shocked and appalled by this flagrant and disgraceful breach of the Geneva Conventions," he said.
"We deplore the decision by al-Jazeera to broadcast such material and call on them to desist immediately.
"We are also requesting all media outlets not to become tools for Iraqi propaganda by rebroadcasting such material."
British Prime Minister Tony Blair is said to have reacted with "horror" to the deaths and that the pictures were shown.
The footage came as British forces scrambled to attack a break-out of up to 120 Iraqi armoured vehicles, including tanks, from Basra towards the al-Faw peninsula.
Two British fatalities in al-Zubayr and two missing around the town had already been confirmed by UK commanders, following fighting there earlier this week.
The MoD says it cannot confirm the nationality of the two captives shown in the TV footage.
Al-Jazeera said it believed they were Kenyans working for the British Army as truck drivers.
The footage also showed armed civilians climbing over the wrecked vehicle and cheering, and a downed
pilot-less reconnaissance plane, or drone.
Shadow foreign secretary Michael Ancram said: "This is another blatant
example of the depths to which this regime is prepared to sink."
The BBC's Clive Myrie reported a "firefight" between British jets and an "absolutely huge" column of Iraqi armoured vehicles breaking out of Basra towards the al-Faw peninsula.
Our correspondent, with 40 Commando in the area, said between 70 and 120 Iraqi armoured vehicles were heading towards the peninsula in a move which was "very alarming" to UK marines holding the territory.
The footage also showed cheering crowds climbing on a wrecked vehicle
It was assumed the vehicles were staging a counter-attack on the British forces to recapture the peninsula, although they could have been fleeing amid a possible uprising in the city, he said.
He said the marines - ill-equipped to deal with such a move - had called in Tornado and Harrier fighter jets from Kuwait which had been attacking the vehicles "with some success".
A "significant number" of British planes had been involved in "heavy air activity" since about 1800 GMT, an RAF spokesman confirmed.
By 2100 GMT, at least three lead vehicles in the column had been
destroyed and the column had also left the main road and begun to scatter into open
countryside, according to a British reporter with the UK troops.
'We won't leave'
Three British combat casualties have been flown back to the UK for hospital treatment, the MoD confirmed. Their condition or in what battle they were injured was not confirmed.
UK prime minister Tony Blair said reports of overnight unrest in Basra were confused, but there appeared to be "some
limited form of uprising" against Saddam Hussein's regime in the city.
Group Captain Lockwood said there were "clear indications" of an uprising, which has been denied by Baghdad.
The BBC's Frank Gardner said investigations seemed to suggest there had been some sort of disturbance, probably involving food and lack of supplies, but it had been quickly quelled by the authorities.
British reporters with the UK troops said coalition forces continued to attack certain targets within the city.
The Red Cross aid agency said it had been able to reconnect only about half of the city's water supply.
Analysts believe the Shia population has been reluctant to rebel against the regime in Basra, because when it did so at the end of the first Gulf War it were abandoned by US and UK forces and crushed by Saddam Hussein.
Group Captain Al Lockwood said: "We will not leave them, not this time. Our intention is to liberate Basra."
As for the military plan in Iraq overall, he said: "We're meeting our targets and objectives and on the timeline."