Children killed' in US Iraq raid in 2 houses in Alishaqi
Khedr Hussein, an Iraqi police major, said 32 people were killed at Ishaqi, 90km north of Baghdad.
Mayor Amer Alwan told Reuters news agency that US aircraft bombed two homes in the early hours of Friday.
He said 32 civilians were believed to be inside and that of 25 bodies pulled so far from the rubble, eight were women and six children.
The US military said in a statement two women were among 20 suspected "al Qaeda terrorists" killed during the ground and air operation.
Troops raided a cluster of buildings in the area around Thar Thar lake in Salaheddin province on Friday, and came under attack from a machine gun and returned fire, killing two suspects, the US military said.
Air support was then called in and 18 more people were killed, it added.
The statement said: "This is another step closer to defeating al-Qaeda in Iraq and helping establish a safe and peaceful Iraq."
"Coalition forces will continue to target not only senior al Qaeda in Iraq leaders, but all terrorists regardless of their titles or positions within the community."
Local people also told an Agence France Presse correspondent that the victims had been civilians and included a large number of children.
AFP said it had not been possible to independently authenticate either report.
Lieutenant Colonel Chris Garver, a US military spokesman, later said: "Obviously, these are serious accusations and we take them seriously - we are looking into them now."
The US military said AK-47 machine guns, rocket-propelled grenades, anti-personnel mines, explosives, blasting caps and suicide vests were found during the operation.
Garver told AFP news agency that the dead women would have been confirmed as combatants in a "battle damage assessment" or inspection of the site following the incident.
"If there is a weapon with or next to the person or they are holding it, they are a terrorist," he said.
In March, Iraqis accused US forces of shooting 11 people in al-Ishaqi, including four women and five children, while US forces maintained it had only killed two women and a child in an air strike.
The BBC later broadcast video footage from the scene showing people with gunshot wounds. The soldiers involved in the case, however, were cleared of all misconduct.
The US military also announced on Friday the death of a soldier who was conducting joint operations with the Iraqi army when a roadside bomb exploded.
Thirty-three American soldiers have been killed in Iraq in the first seven days of December.
Elsewhere Kofi Annan, the outgoing secretary-general of the UN, said the worsening conflict in Iraq is increasing the odds of a regional war in the Middle East.
In his final report on the UN role in Iraq before he leaves office on December 31, Annan said on Friday the violence threatened to "aggravate a range of underlying tensions in neighboring countries."
As a result, "the prospects of all-out civil war and even a regional conflict have become much more real" since his last report, issued three months ago, he said.
His comments appeared to go beyond earlier expressions of concern about the deteriorating situation in Iraq.
He said in a BBC interview aired this week that Iraq was in the grips of a civil war and many people were worse off now than under Saddam Hussein.
Photos confirm US raid child deaths