At least 50 civilians are believed to have been killed during an air raid on a Baghdad market, Iraqi authorities say.
Reports say many of the casualties were children
Graphic television pictures showed people scrabbling through rubble to reach the dead and injured amid the wreckage of al-Nasser market in the Shula residential area of the city.
Reports of the blast came as coalition forces renewed night-time bombing across the Iraqi capital and the northern city of Mosul.
Correspondents in Baghdad say there is no clear information yet on what may have caused the destruction of the market.
On the ground, US-led forces were fighting for control of invasion routes in northern, central and southern Iraq.
Separately, US Defence Secretary Donald Rumsfeld accused Syria of allowing the trafficking of military equipment across its border to Iraq and said it would be held accountable for what the US viewed as a hostile act.
Syria denied sending supplies and said the US was lying to try to divert attention from Iraqi civilian casualties.
Mr Rumsfeld also warned Iran - which organised anti-war rallies on Friday - against allowing Iranian-backed Iraqi rebels to cross into Iraq.
The defence secretary said such combatants would be considered combatants.
Dr Osama Sakhari from al-Noor Hospital near the market told Reuters news agency he had counted 55 people killed and more than 47 wounded from Friday's attack. He said one baby had died in his arms.
Iraq's Information Minister Mohammed Saeed Sahaf told al-Hayat-LBC television that 58 people were dead and he expected the death toll to rise.
Arabic broadcasters in Qatar and Abu Dhabi showed pictures of what they said were victims of the attack - mainly women, children and old people - as well as shots of mothers slapping themselves in grief.
A Reuters correspondent who visited the scene said most of the one-storey shops in the area were destroyed.
Most of the ground was covered by blood and broken glass and there was a crater about two metres (six feet) wide and half a metre deep.
We heard a plane flying over us, we saw a rocket coming in our direction and then we heard the explosion
One man sobbed for his five-year-old son killed while playing near the vegetable market.
"After this crime, I wish I could see [US President George W] Bush in order to cut him to pieces with my teeth," he said.
Another man, Eyad Abadi, told the news agency: "We heard a plane flying over us. We saw a rocket coming in our direction and then we heard the explosion."
Abu Dhabi television said the devastation may have been caused by a US cruise missile.
But US officials at the Central Command headquarters in Qatar told the BBC they had no details yet and suggested it may have been a misfired Iraqi missile.
It is not known if there are any military installations in the area.
The BBC's Paul Wood in Baghdad - whose reports are monitored by Iraqi officials - says the incident could be the largest single loss of life in the war.
He says it will be a propaganda victory for the Iraqis and Baghdad residents will see it as a further example of civilian lives being taken recklessly by the US.
Only two days ago, Iraqi officials said at least 14 civilians died when another shopping area in Baghdad was hit during a coalition air strike.
They added that seven more were killed and 92 injured in overnight raids on Friday.
The attacks included the first use of two satellite-guided "bunker-busting" bombs by the US military aimed at communications centres.
In other military developments:
- An explosion rocks a shopping mall in Kuwait City; one report says an Iraqi missile has landed in the sea near the city
- Reports that one UK soldier has died and several others have been injured in a "friendly fire" incident involving a US aircraft in southern Iraq
- US troops in central Iraq come up against guerrilla-style attacks by the Fedayeen militia, reports the BBC's Gavin Hewitt
- US commanders report four US marines missing after fierce fighting around the strategically important town of Nasiriya
- Coalition warplanes bomb the northern city of Mosul
- Up to 10,000 Kurdish peshmerga guerrillas aided by US forces overrun the headquarters of an Islamic militant group, the Ansar al-Islam
- Iraqi forces fire missiles at the Kurdish-controlled town of Chamchamal, 40 kilometres (25 miles) east of Kirkuk.
In Basra, UK military officials said their troops fired on Iraqi forces to try to stop them shooting at civilians trying to leave the southern city which is suffering from shortages of food, water and medical supplies.
Iraq has rejected coalition claims that there were rebellions in Basra - Iraq's second city - and a journalist for the British news agency Reuters said he saw no signs of uprising on Friday.
The BBC's Andrew Harding with UK troops near Basra says he was told of a group of Iraqi soldiers repeatedly trying to surrender but being prevented from doing so by commanders.
A white flag of surrender was raised up to four times by the force of around 300 soldiers, he was told, adding to a British belief that Iraqi conscripts want to give themselves up but are being forced to fight.
In other developments:
- The United Nations launches a $2.2bn humanitarian appeal for Iraq as its Security Council votes unanimously to resume the oil-for-food programme which uses Iraqi oil revenues to buy food and medicines
- Two Iraqi "sleeper cells" planning attacks on American interests abroad have been captured and their plans foiled, US State Department officials say
- Iraqi media broadcasts message from Saddam Hussein promising rewards for seized coalition military vehicles