The bodies of at least 19 Shias killed in what is believed to be a sectarian attack have been found in a small town near the Iraqi capital, Baghdad.
Security measures have tightened in the wake of soaring violence
Residents said about 50 gunmen attacked Nahrawan, south-east of Baghdad, at nightfall on Thursday.
At least 400 people have died since a holy Shia shrine was bombed last week in the city of Samarra.
The top US commander in Iraq, Gen George Casey, said it appeared the crisis of sectarian unrest had passed.
A daytime curfew was in force in the capital during Friday prayers, in an attempt to curb a surge in violence.
In the latest large-scale attack, insurgents entered Nahrawan at dusk on Thursday and disabled a local electricity sub-station.
Having killed the guards, the attackers moved on to two nearby brick factories, where they killed 19 workers, all believed to be Shia.
"They all have a single bullet to the forehead," town council leader Alaa al-Lamy told Reuters news agency. "This was a sectarian attack."
Gen Casey said another attack on a religious site could inflame tensions
Police said some Shia families were moving out of the area in response to the killings.
Last week, the bodies of 47 factory workers, who had been dragged from their vehicles and shot, were also found in Nahrawan.
At least nine security forces members died in an attack on a checkpoint near Tikrit on Thursday.
Speaking by video link from Iraq, Gen Casey did not rule out the possibiity of a descent into civil war, but suggested the situation had stabilised.
"Is the violence out of control? Clearly not. Now, it appears the crisis has passed," he said.
"But we should all be clear Iraqis remain under threat of terrorist attack by those who will stop at nothing to undermine the formation of the constitutionally elected government."
He said another attack on a major religious site in the next couple of days "would have a significant impact" on the situation.
Earlier on Friday, Prime Minister Ibrahim Jaafari announced he had extended the regular overnight curfew "because of the sensitive security situation".
Although cars were banned from the streets, people were still able to walk to nearby mosques for Friday prayers and the city was largely quiet. A similar curfew was imposed last weekend.
Mr Jaafari also urged mosque leaders not to use "inflammatory" language in their sermons on Friday, warning of "severe measures" if they try to "incite terrorism".
"The street is angry and they should know how to calm the people," he told reporters.
On Thursday, Mr Jaafari cancelled a meeting with senior political leaders, apparently to protest against a campaign to oust him.
Kurdish and Sunni Arab leaders are unhappy with Mr Jaafari, and have said they will not join a national unity government with him at its head.
The Shia-led United Iraqi Alliance, which nominated Mr Jaafari for the premiership, has said it is sticking to its choice.
It is the latest setback to hit attempts to form a new government following the December election.