US and Iraqi forces have discovered a "torture complex" in an al-Qaeda safe haven near Muqdadiya in central Diyala province, the US military has said.
Intelligence provided by local Iraqis led the troops to the torture centre
Three buildings containing chains on the walls and ceilings, and a metal bed connected to a power supply were found during an operation on 9 December.
Mass graves containing 26 bodies were uncovered nearby, the military said.
Correspondents say Diyala has been the focus of some of the fiercest attacks by insurgents in recent months.
Militants displaced from their former strongholds in Anbar province and parts of Baghdad by the US troop surge are believed to have migrated to the province.
Earlier on Tuesday, a suicide bomber killed 13 people and a US soldier in an attack on a recruiting centre for local Sunni Arab militia groups that have been fighting al-Qaeda-linked militants in Diyala.
The grisly discovery of what the US military called an atrocity site and torture complex north of Muqdadiya was made during a security operation more than two weeks ago, but announced only on Thursday.
"Intelligence provided by Iraqi tips led US troops to a suspected al-Qaeda in Iraq safe haven and operating bases," the US statement said.
"Evidence of murder, torture, and intimidation against local villagers was found throughout the area."
Residents of nearby villages said they had known about the torture complex, but had not told the authorities because they had been afraid of reprisals by the militants.
A local policeman told the Associated Press news agency that he thought the chamber had been in use for about a year.
The troops initially discovered what appeared to be a detention facility, near which they found the bodies of 26 people in "multiple mass graves next to execution sites", the statement said.
"In the same area a torture complex was found, consisting of three detention facilities with one doubling as both a headquarters building and torture facility," it added.
"The buildings contained chains on the walls and ceilings, a bed still hooked up to an electrical system, and several bloodstained items."
Written in white paint on one wall above the bed was a Koranic phrase used to welcome a guest: "All who enter it shall be safe."
The US military commander in northern Iraq, Maj Gen Mark Hertling, said he believed the torture facility had been run by al-Qaeda in Iraq as it was located in one of their strongholds.
Graffiti on the site also mentioned the Islamic State of Iraq, an umbrella group that includes al-Qaeda in Iraq and other Sunni Arab insurgents.
After uncovering the site, the troops continued their security sweep of the area and killed 24 suspected militants, Gen Hertling said.
The torture complex was not the first to have been discovered in Iraq. In March, US troops found a similar site in the village of Karma in the western province of Anbar.
They rescued two Iraqis who said they had been spared immediate execution because the militants had wanted to film the killings and their video camera had broken.