Fierce fighting has broken out on the outskirts of the southern Iraqi city of Basra, British military officials have said.
British troops check the identities of Iraqis fleeing Basra
UK troops attacked Iraqi militiamen after they fired mortars and machine guns at up to 2,000 civilians apparently trying to leave the city.
While there are no reports of deaths and an unconfirmed number of casualties, the British military have sent ambulances into Basra to treat the wounded.
Meanwhile, Britain's most senior army chief, General Sir Mike Jackson, rejected suggestions coalition forces have become "bogged down" and that military plans have gone astray.
Defence Secretary Geoff Hoon said Britain would not be sending many more troops to join the 45,000 already in Iraq, despite Washington's decision to sent up to 120,000 US reinforcements.
The first British aid ship has reached the southern port of Umm Qasr, and the bodies of the first British servicemen killed are being flown home.
The Basra citizens were attacked as they tried to cross a bridge on the western outskirts of the city.
British forces spokesman Group Captain Al Lockwood said: "Paramilitary forces loyal to the regime followed them and commenced firing upon them.
"The Black Watch then attempted to intercept the paramilitaries by going round the civilians."
BBC correspondent Hilary Andersson said British military ambulances had reportedly taken away the wounded.
It was suggested the civilians may have been trying to get to food and water aid at points outside Basra - as they had done on previous days.
The city has been encircled for five days and with water supplies cut by half and international agencies warning of a crisis, coalition forces are anxious to be seen to deliver aid.
Major Will McKinlay said centres were being set up on Basra's outskirts to provide food and water to the "hundreds" of fleeing civilians, who would be given safe
Mr Lockwood said militia had been trying to force ordinary residents to fight with them and that those seen leaving may have been attempting to flee.
Sergeant Duane Gardner, of the Queen's Royal Lancers, said: "Civilians tell us that the militia have piled into Basra.
"All their kit, their army - apparently the tanks are hidden in the shop windows and under car parks."
Earlier this week there had been reports of an uprising among Basra's 1.5 million people.
But coalition forces later conceded the situation on its streets were uncertain, while other reports suggested the city was quiet.
Mr Lockwood conceded Basra was "clearly nowhere near" under coalition forces' control, but that the war was being fought "in our time and on our terms".
Speaking at a news conference General Sir Mike Jackson dismissed suggestions that the strength of Iraqi forces had surprised UK and US troops.
"Armies cannot keep moving forever without stopping from time to time to regroup, to ensure their supplies are up," he
"This 'bogged down' is a tendentious phrase. It's a pause while people get sorted out for what comes next."
The general said Iraqi forces had been pinned down and were no match for UK forces.