Forty-nine Iraqi "criminals" have been killed in three separate raids in Sadr City in the capital, Baghdad, the US military says.
"The operation's objective was an individual reported to be a long-time Special Groups member specialising in kidnapping operations," it said.
Iraqi sources said women and children were among those killed, but the US said it was not aware of this.
Sadr City is a stronghold of radical Shia cleric, Moqtada Sadr.
The poor district has been the scene of much fighting between militants and US forces.
US military said its troops had returned fire after coming under sustained attack from automatic weapons and rocket-propelled grenades from nearby buildings as they began to raid a series of buildings in the district.
Ground forces then called in air strikes.
The statement by the US military said: "Coalition forces estimate that 49 criminals were killed in three separate engagements during this operation."
Clouds of black smoke rose from Sadr City, where heavy gunfire continued on Sunday morning with US helicopters circling overhead, Reuters news agency reported.
"We were waking in the morning and all of a sudden rockets landed in the house and the children were screaming," it quoted a woman as saying.
An official loyal to Moqtada Sadr said the attack was "simply barbaric".
"Most of those killed and wounded were women, children and elderly men which shows the indiscriminate monstrosity of the attacks on this crowded area," Abdul-Mehdi al-Muteyri told Reuters news agency.
But the US military denied civilians had been killed.
"Ground forces reported they were unaware of any innocent civilians being killed as a result of this operation," its statement said.