US diplomats and other civilian officials in Iraq received orders to remain inside the heavily fortified Green Zone in Baghdad after Sunday’s shootout involving employees of a US private security firm.

“In light of a serious security incident involving a US Embassy protective detail in the Mansour District of Baghdad, the Embassy has suspended official US government civilian ground movements outside the International Zone (IZ) and throughout Iraq,” a statement released by the embassy said.

The Green Zone is a 10 square kilometres area in central Baghdad housing the Iraqi government and several other international diplomatic missions. Also, all American citizens in Iraq were advised to boost their personal security in order to prevent unwanted incidents.

Several members of a private security company from the United States operating in Iraq were allegedly involved in a shootout in Baghdad on Sunday. Eleven civilians were killed and about 20 injured in the incident that followed a bomb attack.

The North Carolina-based Blackwater firm remained without its licence after the shooting, as Iraqi authorities launched an investigation. The Baghdad government said Tuesday that it will monitor the activities of all security firms operating in Iraq and drastic measures will be imposed if necessary.

Ali al-Dabagh, a spokesman of the government said Wednesday that all companies, regardless of their activities, have to follow Iraqi laws and take responsibility for the actions of their employees.

Al-Dabagh said Blackwater could resume its activities after the inquiry is complete.

The country’s Prime Minister Nuri al-Maliki criticized the company after the incident, saying it was a “a criminal act” and the perpetrators will be brought to justice.

Reportedly, several Blackwater security guards opened fire on suspected militants after a bomb went off near a mosque in the al-Mansour neighbourhood and several mortars were fired as a diplomatic convoy was passing by.

But government officials and witnesses said innocent civilians were killed and injured by the heavily armed men.

The US State Department said the US army has launched its own investigation in order to determine who is responsible for the killings and the circumstances in which the incident occurred.

“There was a firefight, we believe some innocent life was lost. Nobody wants to see that. But I can't tell you who was responsible for that,” the department’s spokesman Sean McCormack said Monday.