American tanks and armoured vehicles have penetrated deep into the centre of the Iraqi capital, raiding President Saddam Hussein's main palace and attacking several other sites.
US troops processed Iraqi POWs in the main palace
US Central Command refused to comment on how long US troops would stay in the city - but as night fell on Monday they were still occupying Saddam Hussein's main palace, the Reuters news agency reported.
A Pentagon official told the BBC that the US military operation is a "show of force" that sends a powerful message to the Iraqi regime - but is not necessarily the "battle for Baghdad".
Elsewhere in Iraq, US defence officials say that initial field tests on a number of chemicals found near the city of Karbala suggest the possible presence of the nerve agents sarin and tabun, as well as mustard gas.
The Pentagon has cautioned that these are only preliminary results and further laboratory tests will be conducted.
There have already been a series of false alarms since the invasion of Iraq began and coalition forces started searching for the weapons of mass destruction which they insist Iraq possesses.
As the US military operation in Baghdad continued, Iraqi television broadcast footage of a meeting chaired by Saddam Hussein at an undisclosed location.
Also filmed at the meeting were the president's son Qusay, Deputy Prime Minister Tariq Aziz and Vice-President Taha Yassin Ramadan.
American forces are said to have occupied at least two palaces
Earlier, Iraqi Information Minister Mohammed Saeed Sahhaf denied that Baghdad's defenders had lost ground, claiming that Iraqi forces had "slaughtered" columns of US troops.
"Don't believe these invaders and these liars. There are none of their troops in Baghdad," the minister told reporters at an impromptu outdoor press conference.
The Americans say they have encircled Baghdad and control access to all major roads.
Spokesman General Vincent Brooks said commanders on the ground "will make decisions on what parts of Baghdad they will retain control of".
In other military developments:
- Reports suggest the top Iraqi commander in the south, Ali Hassan al-Majid - known as Chemical Ali - was killed when his home was bombed at the weekend
- An Iraqi rocket attack on a US command centre south of Baghdad leaves two soldiers and two journalists dead and several other soldiers wounded, according to US military sources
- At least two US marines are killed and many are injured as they fight to capture bridges in the south-east of Baghdad
- UK troops push into the old city of Basra as they establish control over Iraq's second city
- The northern city of Mosul is subjected to heavy bombardment
More than 100 armoured vehicles, including up to 70 tanks, stormed into the Iraqi capital early on Monday, supported by tank-busting A-10 Warthog planes and pilotless drones, US military sources said.
The BBC's Rageh Omaar in Baghdad says weapons fire during the battle was so continuous it "almost sounds like an ammunition store going off".
He says he heard heavy machine-gun fire and mortars during a fierce battle raging near the presidential palace on the bank of the River Tigris.
The presence of American armour on the edges of the Republican Palace presidential compound is "highly symbolic", our correspondent adds.
US officials said American troops had also secured a second presidential compound in the city and surrounded other key buildings during the day.
No figures on Iraqi casualties are available.
The French news agency AFP reported that a missile had hit the Mansour neighbourhood of the capital killing at least nine civilians.
In Baghdad, a US army colonel interviewed by American television outside the Republican palace said he and his men had been conducting searches of the complex.
US troops parked their tanks at the front door of the palace, filmed its lavish interior and walked through its grounds, while exchanging fire with Iraqi fighters.
Iraqi troops fled the scene
Television pictures from inside the palace showed US soldiers amidst ornate furniture covered with grime following the fighting in the city.
Palace curtains were strewn over the ground and personal effects appeared to have been taken from the palace before the raid.
Much of the building appears to have been damaged in earlier coalition bomb attacks.
Iraqi soldiers were seen fleeing the scene of battle, shedding uniforms and weapons as they escaped.
Those who were captured are reported to have been taken inside the palace by American troops processing prisoners of war.
The BBC's Andrew Gilligan in Baghdad says relatively small numbers of US troops are involved in the attack.
The US military says its troops have destroyed 60 Iraqi vehicles, three tanks and three armoured personnel carriers in the operation so far. There has been no independent confirmation.
Nine people are reported to have been killed by a missile
The Information Ministry and the Foreign Ministry remain in Iraqi hands, news agencies report.
The attack followed another night of air raids on the city which intensified as dawn broke with bombs striking the centre of the city.
The Associated Press reported that US F-16 fighter jets bombed Iraqi tanks and armoured personnel carriers as US ground forces advanced into Baghdad.
In other developments:
- US President George W Bush arrives in Northern Ireland for talks with UK Prime Minister Tony Blair on the progress of the war
- Two Polish journalists are reported missing - a colleague says they were detained by armed Iraqis at a checkpoint in southern Iraq
- US military officials say commander of US-led invasion force, General Tommy Franks, has visited troops at three locations in Iraq
- Speaking ahead of a Security Council meeting, UN Secretary-General Kofi Annan says he expects the UN to play an important role in post-war Iraq.