A military spokesman said the U.S. troops were hit by gunfire at a gas station. The gunmen escaped as other soldiers tried to give aid to the wounded, said U.S. Army Capt. John Morgan. Another soldier was injured.
Elsewhere in the Iraqi capital, U.S. troops opened fire at former Iraqi soldiers demonstrating to demand back wages outside the American headquarters, killing two protesters during a chaotic, rock-throwing melee.
Military officers initially reported two people were wounded, while Iraqis at the scene said two were killed and one wounded. U.S. troops took two fallen Iraqis to an army aid station inside the compound, and U.S. Marine Corps Maj. Sean Gibson confirmed the two Iraqis had died.
Another military spokesman said the incident began when the demonstrators threw stones at a convoy of military police vehicles moving toward the arched gateway of the Republican Palace, Saddam Hussein's former presidential compound and now the headquarters of the U.S.-led administration.
In other developments:
In the House, the Select Committee on Intelligence will hold the first of two days of closed-door hearings on reports regarding Iraq's weapons of mass destruction. House Republicans derailed a Democratic effort to force the administration to provide Congress with pre-war intelligence on Iraq's weapons programs. The House International Relations Committee defeated the proposal on a party-line vote of 23-to-15.
A Defense Intelligence Agency report produced before the war said Saddam had chemical weapons and had distributed them to troops in the field, but was unlikely to use them unless threatened with destruction, the New York Times reports.
According to the Australian Broadcasting Company, parliament has approved an inquiry into Prime Minister John Howard's prewar reports on Iraqi weapons.
In Britain, David Blunkett, a top official in Prime Minister Tony Blair's government, denounced two former Cabinet ministers who said prewar intelligence portrayed Iraq as posing no immediate threat. Blunkett claims Robin Cook and Clare Short, who both left the government over the war, did not see the most sensitive spy reports.
The government British government on Wednesday denied a news report saying that an official British investigation of two trailers found in northern Iraq has concluded they were not mobile germ warfare labs.
Iraqis who took part in the protest said the violence began when the crowd pressed against a vehicle moving slowly outside the gate and banged on it. A soldier fired into the air, apparently setting off a panic in the crowd.
AP photographer Victor Caivano said the demonstrators threw stones at the soldiers and at reporters, who were forced to retreat.
Raad Mohammed, a low-ranking former army officer who joined the protest to demand back wages, said his friend was shot in the right shoulder. Mohammed's checkered shirt was stained with what he said was his friend's blood.
Mohammed said he and others were about to put the wounded man in a car when American troops approached and said, "We'll take care of him." He said they took the man inside the compound.
There have been frequent demonstrations outside the Republican Palace, usually over the issue of unpaid wages to civil servants and the army. Wednesday's demonstration coincided with the birthday of Saddam's eldest son, Odai.
The demonstration occurred as U.S. troops intensified their searches in the capital for illegal weapons and supporters of Saddam's regime.
Before dawn Wednesday, troops sealed several streets of the Karrada neighborhood and called residents from their beds to stand in the street as they searched their homes. One man was taken away with his hands bound behind his back.
The military says about 400 people have been arrested since the latest operation, dubbed Desert Scorpion, began on Sunday. The searches have aroused widespread resentment.