US helicopters have killed 17 gunmen with suspected al-Qaeda links in Iraq's Diyala province north of Baghdad, the US military says.
US troops are having to fight from house to house
The attack took place on Friday morning outside the town of Khalis.
Thousands of US troops have engaged in a fourth day of heavy fighting in the area, in what is known as Operation Arrowhead Ripper.
But a senior US commander has admitted that most of the senior al-Qaeda leaders they are targeting have fled.
Eighty per cent of the "upper level" al-Qaeda leaders in Baquba had already left, the US ground forces commander, Lt Gen Ray Odierno, told reporters after visiting the city.
The leaders would be found but had probably escaped the current operation, he said.
The BBC's correspondent Andrew North says it is a surprising admission as the US has billed the offensive as a major effort to eliminate al-Qaeda from the area.
Gen Odierno said that 80% of lower-level al-Qaeda fighters were still there.
US forces engaged in the offensive are facing fierce resistance from hundreds of militants ready to fight to the death, said Gen Mick Bednarek, deputy commanding officer of the 25th Infantry Division.
He said fighting was from "house to house" and 40 suspected militants had been killed in the first two days.
Gen Bednarek said troops raided a house on Thursday that contained what appeared to be a torture chamber.
West of Baghdad, a suicide bomber struck a police patrol in Falluja, killing two officers.
US officials accuse al-Qaeda - who are Sunni Muslims - of using terrorist attacks to foment civil war with Iraq's Shia Muslim majority.
"When you walk into a room and you see blood trails, you see saws, you see drills, knives, in addition to weapons, that is not normal," Gen Bednarek said of the suspected torture chamber.
The offensive comes as the US command completed a build-up of 156,000 troops in Iraq, to help curb sectarian bloodshed and allow time for reconciliatory moves by the Shia-dominated government towards Sunni Arabs.
The operation, codenamed Arrowhead Ripper, is centred on Diyala province and its capital Baquba, just north of Baghdad. It is one of the biggest campaigns undertaken by US troops since the invasion in 2003.
Gen Bednarek said his troops had received logistical support from local Sunnis armed groups who were anti-US but who wanted to end al-Qaeda domination of their communities.
There has been no official acknowledgement of civilian casualties, but in a BBC interview, the head of Baquba's emergency services said at least 12 civilians had been killed by the end of the first day, and ambulances were being prevented by US troops from reaching others.