The United States has expressed "deep regret" after its forces fired on Iraqi security officials, killing at least nine people.
Iraqis are furious with the Americans
A US military spokesman said a US patrol was initially attacked by a truck on Friday near the flashpoint town of Falluja, about 50 kilometres (30 miles) west of Baghdad.
Coalition forces returned fire and the engagement lasted three hours, Lieutenant Colonel George Krivo told reporters in Baghdad.
"We wish to express our deepest regrets to the families who have lost loved ones," Colonel Krivo said.
He promised a high-level investigation.
It was the second friendly-fire case in two days around Falluja, a stronghold of supporters of ousted Iraqi dictator Saddam Hussein.
There were chaotic scenes as people gathered to pray at the city's central mosque before the eight Iraqi policemen were buried, their coffins draped in the Iraqi flag.
Local police fired shots in the air as angry Iraqis chanted "America is the enemy of God", "The blood of our martyrs will not go in vain" and "Falluja will keep its jihad".
The local imam, Fawzi Shafi, urged mourners to "save your bullets for the chests of the enemy".
"Let the Americans get their hands off the city," he said through loudspeakers.
Senior Sunni clerical figures issued a statement condemning the "massacre which was committed on Friday against people dedicated to the protection of Falluja".
They have called a general strike on Sunday to coincide with the beginning of three days of mourning for those killed.
'We are police!'
There are conflicting reports about what happened as the cars reached the US checkpoint in Falluja.
The BBC's Barbara Plett in Baghdad says it appears there were three police vehicles - one an unmarked pick-up with a rear-mounted machine gun - chasing a fourth vehicle containing gunmen.
US forces were said to have opened fire on the police vehicles after being surprised by the armed pick-up truck that failed to stop at the checkpoint.
Survivors say that despite repeatedly shouting to the Americans "We are police!", the firing didn't stop.
Jordanian soldiers guarding a hospital near the checkpoint reportedly also opened fire when US troops began shooting, catching the Iraqi police in the crossfire.
Eight Iraqi policemen and a Jordanian security guard were killed.
An Iraqi doctor said nine people were injured.
A Jordanian news agency said US Secretary of State Colin Powell telephoned the Jordanian foreign minister to express regret for the "sad incident".
Our correspondent says the latest incident will almost certainly set back US efforts to calm this volatile region, where there is fierce resentment of the occupation and anger at the number of locals killed by US forces.
The hospital was badly damaged by gunfire
On Wednesday, US troops in Falluja shot dead at least one Iraqi policeman and wounded another when their convoy was hit by a bomb.
Falluja - part of the US-coined "Sunni Triangle" where support for Saddam is strongest - has been the scene of frequent clashes involving US troops.
And in the nearby town of Ramadi two American soldiers were killed and seven wounded in a pre-dawn raid on Friday.