Iraqi Sunni fighters have been battling militants linked to al-Qaeda in a suburb of Baghdad, in a sign of growing rivalry among Sunni insurgents.
US troops hope the Sunni in-fighting will bring them new allies
Residents of Amiriya in Baghdad have been joined by Sunni militants from nationalist groups in an effort to expel al-Qaeda fighters.
US forces have offered to strike a deal with the groups less hostile to them.
The BBC's Jim Muir says the latest power struggle could potentially yield an exit strategy for US forces in Iraq.
Sunni Iraqi tribal leaders in the restive western province of Anbar have already mobilised forces against al-Qaeda militants.
Our correspondent says the latest clashes show the rebellion against al-Qaeda has now spread to part of Baghdad's Sunni community.
The al-Qaeda group's severe interpretation of Islam, its use of foreign fighters and its brutality are said to be the main factors driving local resentment towards them.
US forces said they had imposed a curfew in Amiriya in an effort to stop fighters from re-arming.
But residents quoted by AFP news agency said this had not stopped fresh clashes from taking place on Friday.
No official figures are available for the numbers killed in the violence in Amiriya.
"Al-Qaeda fighters and leaders have completely destroyed Amiriya," Abu Ahmed, a local Sunni resident, told AP news agency.
"No one can venture out, and all the businesses are closed. They kill everyone who criticizes them and is against their acts even if they are Sunnis."
Lt Gen Raymond Odierno, the second-highest ranking US officer in Iraq, said the military was trying to "reach back" to fighters who wanted to stop attacking US forces.
"We're talking about ceasefires and maybe signing some things that say they won't conduct operations against the government of Iraq or against coalition forces," he said.
At least 126 US troops were killed in Iraq in May - the third-deadliest month for US forces since the invasion in 2003.
An Iraqi government source said more than 2,000 Iraqis had also died violently in the same month.
On Saturday, an explosion blamed on militants destroyed a major bridge on the main road linking Baghdad with the northern cities of Kirkuk and Irbil.
On Friday, three children died in a US attack aimed at militants in Anbar province.