A US jet bombed a mosque in Fallujah, west of Baghdad, killing at least 40 people inside on Wednesday, report agencies.
"We wanted to kill the people inside," Marine Lieutenant Colonel Brennan Byrne told reporters.
The incident came a day after 12 US Marines, two other coalition soldiers and hundreds of Iraqis were killed in widespread violence across Iraq, the worst so far since US President George Bush declared the end of the invasion in May last year.
Following the attack and mutilation of two American mercenaries there last week, US forces Monday surrounded and launched a major operation in Fallujah, known to be a stronghold of Sunni guerrillas opposed to the US occupation.
On Tuesday, at least a dozen Marines were killed when gunmen attacked a US patrol in the neighbouring town of Ramadi. The street battles were continuing Wednesday morning, with witnesses saying at least two Iraqis were killed.
Also on Tuesday, loyalists of radical Shia cleric Muqtada al-Sadr attacked coalition troops in five southern cities including Kut, Karbala and Sadr City in Baghdad. Initial reports said at least a dozen Iraqis and a British civilian were killed in Kut, while four Iraqis were killed in Sadr City, Baghdad. Doctors in Karbala said two Iranians caught in the fierce crossfire died.
An arrest warrant was issued by the coalition on Monday against Muqtada, who has urged his Al Madhi army to drive out the foreign occupiers of Iraq.
Tuesday's casualties could bring the toll to about 30 Americans and more than 150 Iraqis killed in the fighting since Sunday.
In another development, a US helicopter reportedly crashed in the central Iraqi city of Baquba, but no official confirmation was available.
