A powerful car bomb exploded outside the Jordanian Embassy, killing between seven and 12 people and wounding 52, many of them seriously, hospital and rescue officials said.
Later Thursday, a fierce gun battle broke out in central Baghdad, with at least one American casualty.
The battle followed a firefight the night before in which two American soldiers were killed, the military announced. The two were killed in a battle in the Al Rashid section of Baghdad, and their translator was wounded, the U.S. Central Command said.
The deaths Wednesday night ended a four-day period in which no U.S. forces had been killed and brought to 55 the number of U.S. troops killed in combat since May 1, when President Bush declared major fighting over.
Elsewhere, U.S. forces captured four suspected leaders of the anti-U.S. resistance in pre-dawn raids Thursday, the military said, a day after the Americans netted 18 suspected Saddam Hussein loyalists and found a huge stockpile of weapons.
In other developments:
Thursday's gun battle erupted when a U.S. Humvee was attacked by rocket-propelled grenades. The soldiers returned fire into a two-story building, and at least eight more Humvees of Americans joined the fight. There was heavy machine gun and automatic rifle fire. Two helicopters hovered above.
One soldier was seen being evacuated from the firezone. U.S. forces stormed the building and emerged about five minutes later carrying their comrade. It was not immediately known if the soldier had been killed or wounded.
Before taking the building, the military allowed about 20 civilians inside to come out with their hands in the air. Some carried white handkerchiefs. After the soldiers attacked, the building began burning and was gutted.
Lt. Gen. Ricardo Sanchez, commander of U.S. ground forces in Iraq, told a news conference the attack on the Jordanian Embassy was "the worst on a soft target" since Baghdad fell to American forces April 9.
The blast blew down one wall of the embassy and gutted nearby cars, hurling the mangled remains of one onto the roof of a nearby building. Two bodies were seen still sitting in some of the vehicles damaged in the blast.
Shortly after the blast, young Iraqi men stormed the embassy gate and began destroying pictures of Jordanian King Abdullah II and his late father, King Hussein. They were shouting anti-Jordanian chants, but were quickly dispersed by American forces and Iraqi police.
The bomb was believed to have been planted in a minibus parked outside the walled embassy compound and detonated remotely. The chassis of the minibus landed on top of three of the burned out cars.
The Jordanian consul, Karim Shushan, was among the wounded, said Ahmed al-Bakri, a doctor at the Yarmuk Hospital.
"I was sitting in the reception. I heard the first explosion, I ran out and then there was another explosion. Many employees were inside the embassy as well as Iraqis and Jordanians. Smoke filled the street," said Shaheed Mazloum, 50, an Iraqi guard at the embassy, who was treated at the al-Kharkh Hospital.
In Jordan, Information Minister Nabil al-Sharif condemned the "cowardly terrorist attack."
"This criminal act will only boost our determination to continue our support for the brotherly Iraqi people," he said.
Tensions between the neighboring countries have been high because of Jordan's support for the U.S.-led war on Iraq.
While Jordan is a major entry point into Iraq and remains a large trading partner, many Iraqis are resentful that Jordan dropped its support for Saddam after the 1991 Gulf War, and allowed U.S. troops to use its soil as a base during the latest war.
King Abdullah II last week granted "humanitarian asylum" to two daughters of Saddam, whose husbands fled to Jordan in 1996 but were lured back home and killed by Saddam's regime in 1996.