An investigation into images appearing to show UK troops abusing Iraqi youths must be carried out swiftly, Iraq's national security adviser has said.
The paper ran pictures of the footage on Sunday
Mowaffaq al-Rubaie said any abuse was "not acceptable", adding "we demand an immediate and rapid investigation".
Mr Rubaie also called for any team of investigators to include Iraqis.
He said any British soldier found to be responsible for abuse "must compensate those victims and apologise to them directly".
The Royal Military Police arrested a serving soldier after Sunday's News of the World newspaper ran the pictures, said to have been taken from a 2004 video.
Earlier Dr Bashar Al Naher, who has been widely quoted as a spokesman for Iraqi Prime Minister Ibrahim Jaafari, also called for anyone found to be responsible to be brought to justice immediately.
But the Iraqi leader's office in Baghdad later denied Dr Naher was a spokesman for him and said Mr Jaafari was not making any statement on the allegations.
The UK's Ministry of Defence said military police officers planned to interview witnesses, visit the scene, and speak to any alleged victims.
The News of the World, which published the pictures, said they came from a video shot in southern Iraq in 2004.
The tape - described by the paper as a "secret home video" - allegedly showed a disturbance in the street outside what the paper called a military compound.
Soldiers were shown chasing youths involved in the disturbance, dragging four of them into the compound and beating them on various parts of the body with batons and kicking them, one in the genitals.
The attack is said to last for one minute, with 42 blows counted.
The News of the World said a soldier could also be seen kicking a dead Iraqi in the face.
On the tape, it said an unidentified cameraman was heard laughing and urging his colleagues on.
The paper said it has established the soldiers involved were British, but would not disclose which unit or regiment were allegedly involved.
A military spokesman in Iraq has condemned "all acts of abuse and brutality" by British troops and said the allegations related to a "tiny number" of soldiers.
UK Prime Minister Tony Blair, who was in South Africa at the weekend for a summit on poverty and development, said the presence of troops in Iraq was "helping Iraq to become the democracy they want to be" and "of fundamental importance".
The MoD later said members of the 1st Battalion The Light Infantry were "helping with enquiries".
The unit is no longer in Iraq, having finished its last tour of duty in April 2004 before returning to its base in Paderborn, Germany.