The explosion occurred a day after a suspected Sunni gunman opened fire on U.S. soldiers attending a municipal council meeting southeast of Baghdad, killing two of the troops and wounding three others. An interpreter was also killed in that attack.
Secretary of State Condoleezza Rice, in Berlin for an international conference to help Palestinians, called Tuesday's attack a terrible reminder of the dangers Americans face as they work to help rebuild the country and "advancing our critical foreign policy goals."
The blast took place in the office of the council's deputy chief as Americans and Iraqi officials were gathered nearby about half an hour before a meeting to elect a new chairman, said Hassan Karim, Sadr City's top administrator.
Karim said he was sitting in his office, which is located at the same building and about 50 yards from the targeted office, when the bomb exploded. He said he ran out of his office and found the corridors engulfed in smoke.
He couldn't confirm the number of casualties, saying that several employees and visitors were inside the building.
"I only saw three council members on the ground who were wounded before the Americans ordered us to stay in another office fearing another explosion could take place," Karim told The Associated Press in a telephone interview.
After that, he said, the U.S. troops started investigating the employees and the guards of the building. A witness said the Americans rounded up the guards in the immediate aftermath. U.S. troops sealed off the building and the area.
The district council office is in a southern section of Sadr City that is largely controlled by U.S. and Iraqi troops following weeks of fighting in the area amid a government crackdown against the militias.
Deputy council chief Hassan Hussein Shammah, who was believed to be the attack's main target, was wounded in his leg.
"We were getting ready for the weekly meeting to discuss the services in the area. Suddenly a huge explosion took place," he told AP Television News from his hospital bed.
The U.S. military said one soldier was wounded in addition to the two soldier fatalities. U.S. Embassy spokeswoman Mirembe Nantongo said the dead Americans included one State Department and one Defense Department employee.
In addition, an Italian of Iraqi origin who was working as an interpreter for the Americans was killed, according to the Italian Foreign Ministry.
Rice identified one of the slain Americans as Steven L. Farley of Guthrie, Okla. The embassy said he was a member of a Provincial Reconstruction Team embedded with the U.S. military in the area.
American Ambassador Ryan Crocker also condemned the attack and insisted, "We remain committed as ever to helping Iraqis achieve the peace, stability and prosperity that will make such acts of terror a thing of the past."
An official of the Iraqi Interior Ministry said four Iraqi civilians were killed and 10 others wounded. He spoke on condition of anonymity because he wasn't authorized to release the information.
U.S. military officers have been working vigorously to restore and promote local administrations amid a sharp drop in attacks over the past year, with the goal of preventing areas from falling back under the control of rival Sunni and Shiite extremists.
Their increased presence in local communities has made them more vulnerable to attacks, but American commanders have cited it as a necessary factor in a strategy that has helped drive down the levels of violence to the lowest point in more than four years.
The U.S. military blamed Tuesday's attack on "special groups criminals," a term it uses for Shiite militiamen refusing to follow a cease-fire order by anti-U.S. cleric Muqtada al-Sadr.
"This was the fourth meeting of this district council, led by hardworking Iraqis determined to make a difference and set Sadr City off on the right path. Special Groups are afraid of progress and afraid of empowering the people," said Lt. Col. John Digiambatista, operations officer with the 3rd Brigade Combat Team, 4th Infantry Division.
The attack in Madain also targeted Americans who were attending a municipal council meeting in the area, also known as Salman Pak, about 14 miles southeast of Baghdad.
U.S. troops killed the assailant, who was believed to be a former member of the municipal council, after the attack, which occurred in an area with a history of Sunni-Shiite tension.
In other violence Tuesday, gunmen killed the head of the local council in Abu Dshir, a Shiite enclave in the mainly Sunni area of Dora in southern Baghdad. Police said the council chief Mahdi Alwan was a member of al-Sadr's movement.
The U.S.-backed Iraqi military, meanwhile, pressed forward with efforts to assert government control over al-Sadr's Mahdi Army militia and other armed groups in the southern city of Amarah.
The Iraqi Defense Ministry announced a three-day deadline for all parties to voluntarily evacuate government buildings in Maysan province, of which Amarah is the capital, or face removal by force.
A provincial government official also said Iraqi security forces had begun a campaign to remove all portraits and pictures of senior religious figures from walls, buildings and the streets in the province.
