"A local Iraqi citizen's tip led coalition forces to the site of a mass grave late Friday evening outside Ferris, approximately 35 kilometers (21 miles) south of Fallujah," in western Anbar province, the military said.

"Coalition forces uncovered 35 to 40 bodies at the site. The remains were bound and had gunshot wounds."

Major Jeff Pool, spokesman for US forces in Anbar, said US Army soldiers found the grave after a tip-off.

"There were gunshots to the head and torso. Some of them had been bound, they were executed. It was recent," he said, adding that an investigation had been launched to identify the victims and their killers.

In pre-dawn raids in the Baghdad Shiite district of Sadr City, US and Iraqi forces backed by helicopters killed 26 militants suspected of links to "Iranian terror networks," the US military said. Seventeen more were detained.

"It is believed that the suspected terrorists have close ties to Iranian terror networks and are responsible for facilitating the flow of lethal aid into Iraq," it said.

The impoverished neighbourhood woke before dawn to the sound of rockets slamming into buildings and machine guns raking the concrete apartment blocks.

Dozens of gunmen ran through the streets, firing pistols and machine guns at US helicopters which responded with missiles. Several cars and homes were destroyed.

Meanwhile, a suicide bomber killed at least four police recruits and wounded around 30 other people in an attack on a police station in Muqdadiyah, northeast of Baghdad, an official said.

Interior ministry director of operations Brigadier General Abdel Karim Khalaf said the attack took place around noon in Muqdadiyah, Diyala province, the second most dangerous region in Iraq after Baghdad.

Police Lieutenant Ahmed Ali from the provincial capital, Baquba, said those killed were all police recruits.

Hours later, three Iraqi army soldiers were killed when a booby-trapped house exploded in the heart of the provincial capital of Baquba, Ali said, adding that another three Iraqi soldiers were wounded in the blast.

The attacks came less than two weeks after US and Iraqi forces launched a massive air and ground assault against Al-Qaeda strongholds in the province.

In Baqubah, the heart of the operation, thousands of US and Iraqi troops have been tip-toeing through deserted city blocks lined with deeply buried roadside bombs and entire houses decked with explosives.

On Saturday, the US military revealed that a man killed in a US-led raid east of Fallujah on Friday was a senior Al-Qaeda militant.