It said 397 suspects had been arrested so far in a massive sweep near the town of Balad, about 40 miles north of the capital. A large quantity of arms and ammunition was seized in the ongoing operation.
In the latest attack on Americans, assailants fired rocket-propelled grenades at a checkpoint in Baghdad's southwestern suburbs, killing one U.S. paratrooper and wounding another, Central Command said.
It said the soldiers from the 82nd Airborne Division's 2nd Brigade were manning a weapons collection on Tuesday afternoon when they were attacked.
In other developments:
Despite the ouster of Saddam Hussein's regime on April 9, U.S. troops have continued to be attacked, mainly in central and western Iraq. Dozens of soldiers and Iraqis have been killed or wounded in daily skirmishes.
Military commanders have insisted the attacks are uncoordinated, and lacked centralized command.
But there is growing evidence that the attacks are being organized on at least a regional level by remnants of Saddam's government, CBS News Correspondent Mark Phillips reports.
On Tuesday, the leader of a once-banned opposition group said Saddam is offering a bounty for every American soldier killed — a report the Pentagon cannot confirm.
Speaking in Washington, Chalabi also said that Iraqis need to patrol their own country with a new security force, and that the ratio should be about one American to 10 Iraqis.
Defense Secretary Donald H. Rumsfeld said Tuesday during a visit to Portugal that the United States is talking to about three-dozen countries about contributing troops to an international peacekeeping force for Iraq.
But Rumsfeld also said that even after the force begins arriving in September, there will be resistance from elements of Iraq's former Baathist Party and other Saddam loyalists.
A top Pentagon policy adviser, Joseph Collins, says the task of stabilizing postwar Iraq has turned out to be "tougher and more complex" than the Bush administration expected.
Repairing the Iraqi economy will also be no easy feat.
A severe shortage of Iraqi dinars — compounded by the rejection by many Iraqis of the 10,000 dinar note issued just before the war — led the U.S.-supervised Iraqi central bank to start printing millions of new 250 dinar notes, according to local media reports on Wednesday.
L. Paul Bremer, who heads the Coalition Provisional Authority in Iraq, also announced the formation of a project that would help Iraqis start businesses and connect would-be foreign investors toward Iraqis in need.
"We're facing an unemployment problem that is probably without precedent in my lifetime," Bremer said at a news conference in Baghdad's convention center.
Bremer said the future "business support and information center" would be a joint project of the U.S.-led occupation government, the International Monetary Fund, the World Bank and the U.N. Development Program.