Authorities say the small buses where traveling through the Fadhil neighborhood, a Sunni enclave in central Baghdad, when they were waylaid by unidentified gunmen in three cars at 10:15 a.m.
The insurgents then abducted at least 15 passengers and took them to a nearby abandoned government building.
The buses were heading from Baghdad's central Bab al-Mudham bus station to the city's eastern Shiite neighborhoods.
The fighting began when Iraqi security forces reached the scene about 30 minutes later, police said.
Nine militants were arrested as they attacked security forces from nearby alleys with light weapons.
According to Iraqi police, at least two U.S. helicopters were hovering overhead and U.S. forces had taken up positions near the fighting, but were not directly involved.
Sunni insurgents have repeatedly clashed with U.S. and Iraqi forces in the Fadhil area, which is also known for its high crime rate.
In Other Developments:
The bomb went off at 2 p.m. in the Sinak commercial district on the east side of the Tigris River. Ghaith Karim, a 38-year-old Shiite cloth merchant, said he saw fire ball and heard the loud blast. "It was tremendous. I felt the ground was shaking," Karim said. "When I reached the scene, I found legs, charred pieces of bodies and pools of blood. Casualties were being evacuated by civilian cars. Firefighters battled to extinguish the fire."
people and injured another nine when it detonated under a parked
car in the central Baghdad district of Bab al-Muadham.