At least 13 gunmen were killed in the latest clash between US and Iraqi forces and the militants loyal to Shia cleric Moqtada Sadr, the US military said.

The two sides clashed in several parts around Baghdad's eastern Sadr City. The military described the battle as "complex", probably because it used both tanks and air support.

After fighting the militants, the military managed to end a two-week blockade of the area and now cars are passing through from both directions at some crossings. Several routes around Sadr City remained closed.

The clash was described by locals as the bloodiest since Iraqi forces assaulted the area a week ago.

However, despite all the violence, the situation is now stable, military authorities said. The overnight clashes won’t disrupt plans to lift the blockade said the Iraqi government's Baghdad security spokesman, Maj Gen Qassim Moussawi.

There were no seriously injured among the US or Iraqi troops, said Maj John Gossart, executive officer of the battalion involved in the fighting.

According to the local police, seven civilians were killed in the clashes that took place on the streets of the city between American and government troops and al-Sadr's Mahdi Army militia.

The militants are holding Americans and Iraqi military the assassination of Riyadh al-Nouri, the director of the cleric's office in the Shiite holy city of Najaf. Al-Nouri was killed in an ambush by gunmen when he was returning home from Friday prayers.