Abu Omar al-Baghdadi was arrested along with several other insurgents in a raid in the town of Abu Ghraib, said Brig. Gen. Qassim al-Moussawi, spokesman for the Baghdad security operation. U.S. officials had no confirmation of the capture and said they were looking into the report.
Al-Moussawi said al-Baghdadi admitted his identity, as did another "of the terrorists" who confirmed "that the one in our hands is al-Baghdadi."
The arrest of al-Baghdadi would be a major victory for U.S. and Iraqi forces in their fight against Sunni insurgents, especially the hardcore religious extremists who have shown no interest in negotiating an end to their struggle.
But some analysts have pointed out that the al Qaeda-linked extremists rebounded following the death last June of Abu Musab al-Zarqawi, the charismatic al Qaeda in Iraq leader who died in a U.S. air strike in Diyala province.
The self-styled Islamic State of Iraq was proclaimed in October, when a militant network that includes al Qaeda in Iraq announced in a video that it had established an Islamic state in six provinces including Baghdad that have large Sunni populations, along with parts of two other central provinces that are predominantly Shiite.
Unlike al-Zarqawi, virtually nothing is known of al-Baghdadi, including his real name. It is widely assumed that the name al-Baghdadi was taken as part of a campaign to make al Qaeda appear more of a homegrown Iraqi movement rather than an organization dominated by foreigners.
In a tape released last November, al-Zarqawi's successor, Abu Hamza al-Muhajir, called on Sunni Muslims to pledge their allegiance to this new state and said al-Baghdadi was "the ruler of believers" with al Qaeda in Iraq fighters under his command.
Since then, the trappings of an Islamic shadow state with al Qaeda as its base has been taking shape in some towns and cities of Anbar province where a government presence hardly exists, according to Sunni residents.
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Residents of Sunni insurgent areas north and west of the capital have reported seeing handbills posted on walls in the group's name warning against un-Islamic behavior such as drinking alcohol.
Some residents of Anbar say Islamic State members have on occasion publicly flogged men for other offenses such as wearing long hair or harassing women and provided cooking fuel to residents in areas where the Iraqi government has little presence.
In its numerous Web postings, the Islamic State refers to punishment meted out by Islamic courts, although it is uncertain if these meet any standard under Islamic jurisprudence.
Last weekend, the Islamic State posted an online video of the execution-style shooting of 18 Iraqi security troops kneeling on the ground near a citrus grove. The three-minute video claimed the 18 kidnapped government security forces were slain in retaliation for the alleged rape of a Sunni woman by members of the Shiite-dominated police in Baghdad.
A senior adviser to Prime Minister Nouri al-Maliki told The Associated Press that al-Baghdadi had been taken into custody. The adviser spoke on condition of anonymity because he was not authorized to release the information.
The reported arrest followed rumors this week that al-Baghdadi's brother had been arrested in a raid near Tikrit.
On Friday, the Islamic State of Iraq announced it would soon release a video on the death of a U.S. Air Force pilot whose F-16 jet crashed Nov. 27 north of Baghdad, according to IntelCenter, which monitors insurgent Web sites.
The pilot, Maj. Troy L. Gilbert, was listed officially as "whereabouts unknown" but then reported by the U.S. military as dead following DNA tests from remains at the scene. IntelCenter said it was unclear what the video would show.
The Islamic State has also claimed responsibility for downing several of the U.S. helicopters lost since Jan. 20, including one in Diyala province that killed 12 soldiers and a Sea Knight transport helicopter north of Fallujah that killed seven.
On Wednesday, the group claimed in a Web posting that its members stormed a northern Iraqi prison the previous day and freed 150 inmates there. The statement said the raid was personally ordered by al-Baghdadi.
Iraqi police had said gunmen stormed the Badoosh prison, 15 miles northwest of the northern Iraqi city of Mosul, and freed about 140 inmates, going cell to cell, then fled themselves.
The purported arrest comes at a time when the Baghdad security operation is showing early signs of progress in curbing violence. Car bombings have decreased in frequency, despite last Monday's devastating blast that killed 38 and this week's rash of assaults against Shiite pilgrims that claimed more than 340 lives nationwide.
South of the capital, Shiite Muslims began holy rites in Karbala at the start of a holiday that marks the end of a 40-day mourning period after the anniversary of the death of the Prophet Muhammad's grandson.
Crowds of pilgrims held their hands in the air and bowed their foreheads to the ground, chanting prayers outside Karbala's Imam Hussein shrine, 50 miles south of Baghdad. Iraqi television channels streamed live video of noontime prayers at the shrine.
Millions of pilgrims have traveled to Karbala over the past week, and more than 350 people have died in violence since Monday — most of them Shiite pilgrims killed in sectarian attacks along the way.
"To the martyrs who were killed during the procession to Karbala ... we offer sympathy to their families," Sheik Ahmed al-Safi said in a sermon Friday at the Iman Hussein shrine.
"I demand the government hit with an iron hand ... the outlaws and terrorists," he said. "All Iraqis should feel safe under the state's umbrella."