US and Iraqi forces opened an investigation on Wednesday after two American soldiers were gunned down by an Iraqi comrade following an argument over a sports match.
The Iraqi soldier was also shot dead.
The shooting, which also left nine US troops wounded, resulted in the first American military fatalities in Iraq since Washington declared an official end to combat operations in Iraq last week.
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The assault occurred on Tuesday afternoon at Iraq's Al-Saadiq Air Base near the city of Tuz Khurmatu in Salaheddin province while an American military company was visiting local security forces, US and Iraqi officials said.
"Iraqi soldiers and American military advisers were playing sports when a quarrel broke out between an Iraqi soldier and an American," defence ministry spokesman Major General Mohammed al-Askari told AFP.
"The Iraqi soldier opened fire on them," Askari said, naming the gunman as Soran Rahman Saleh Wali.
"The American soldiers killed the Iraqi soldier. We have opened a high-level investigation into this issue."
A US military statement said: "Eleven US soldiers were engaged with small arms fire, killing two and wounding nine, inside an Iraqi army commando compound."
Iraqi gunman part of special forces: Police
The gunman was a member of one of the army's elite special forces units, said Colonel Hussein Bayati, police commander for Tuz Khurmatu, north of Baghdad.
There were no details on what set off the argument or on the Iraqi soldier's possible motives.
However, Bayati said that on Monday, US and Iraqi forces "began searching houses in the neighbourhood where this soldier was from because they suspected Ansar al-Sunna (insurgent) fighters were hiding there."
It was unclear if Wali might have already been under surveillance or if the sweep had angered him.
The shooter's family declined to speak to AFP.
US forces said the incident occurred at around 3:50 pm (1250 GMT), and that the condition of the wounded, who were evacuated to Joint Base Balad north of Baghdad, could not be confirmed.
It said the names of the dead would be released after their families were informed.
Under the terms of a bilateral security pact, American soldiers are allowed to return fire in self-defence, and take part in operations if requested by their Iraqi counterparts.
The deaths were the first American military fatalities in Iraq since the US declared an end to its combat mission in Iraq on September 1, transforming its role to what it has described as "advise and assist" operations.
"This is a tragic and cowardly act, which I firmly believe was an isolated incident and is certainly not reflective of the Iraqi security forces in Salaheddin," said Major General Tony Cuculo, US commander in northern Iraq.
Tuesday's violence brought to 4,418 the total number of US soldiers who have died in Iraq since the 2003 US-led invasion to oust Saddam Hussein, according to an AFP tally based on independent website icasualties.org.
The shooting comes just two days after American troops helped repel a coordinated suicide attack on an Iraqi army complex in Baghdad by providing "suppressive fire" to give cover to local forces as they stormed a building in which the insurgents had hidden.
The attack, which killed 12 people, occurred in the morning at Rusafa military command headquarters, in the centre of the capital, when six suicide bombers assaulted the compound in a minibus.
Nearly 50,000 US troops remain stationed in Iraq. Last week, US Vice President Joe Biden launched the new mission while visiting Baghdad, opening a fresh phase in a seven-year deployment.
