A further 23 people, including several more women and children, were wounded in the assault, which the US said targeted "terrorists associated with senior Al Qaeda in Iraq network members."
An Iraqi police officer had earlier said that US troops killed six people in the raid northwest of Baquba, and an AFP photographer saw six bodies in the city's hospital following the operation.
"As the troops began to secure the area, they received small arms fire from the rooftop of one of the initial target buildings," the US statement said, adding that soldiers had shouted warnings before calling in air support.
"The troops secured the area using a combination of aerial and ground fire ... We regret that civilians are hurt or killed while coalition forces search to rid Iraq of terrorism," it added.
Mohammed Omar, a resident of the area, said that local guards had opened fire on the US soldiers thinking that they were insurgents.
The US military has been repeatedly criticized for killing Iraqi civilians, the most notable case being November's alleged rampage by Marines in Haditha in the western Anbar province in which 24 civilians were killed.
Diyala province, especially the area around Baquba, has been riven by sectarian fighting, with gunmen from both the Sunni and Shia communities carrying out massacres of civilians.
Sectarian militia have also been on killing sprees in the capital Baghdad, where authorities extended a vehicle ban tied to Friday's weekly prayers from four to eight hours.
As part of the month-old "Operation Together Forward" to restore security to Baghdad, a vehicle ban was put in place during prayer times to cut down on the increasingly common attacks against mosques.
The curfew was extended on Friday by the government, and now lasts from 11:00 am (0700 GMT) to 7:00 pm (1500 GMT).
The original ban was meant to discourage car bombs and vehicle-borne bands of gunmen who have been known to attack mosques at prayer time, but bombers struck again on Friday, killing one worshiper outside a Sunni mosque.
Elsewhere in and around the city, three Iraqi police and three soldiers were killed in a firefight with insurgents, a Christian government official was shot dead and four dead bodies were found bearing signs of torture.
A recent UN report on the situation in Iraq, which noted that 40 percent of the civilian casualties in the first six months of the year occurred in May and June, also mentioned the increased number of attacks on places of worship.
"Attacks against mosques of Sunni and Shia denomination, as well as against religious authorities, have also reportedly resulted in diminished attendance," the UN Assistance Mission for Iraq's human rights report said.
The security operation has put 50,000 US and Iraqi troops on the streets, most visible in the increased number of checkpoints, but also in more numerous operations around the city.
According to the US military, the first 30 days of the operation did see a decline in the number of attacks, except for the Sunni areas of Adhamiyah in the north of the city and Dora in the south, which saw sharp rises.
But the past week has seen a 40 percent increase in the average number of daily attacks around the city, from around 24 to 34.
"This isn't a plan that is going to be executed and completed in weeks, but rather months," coalition spokesman Major General William Caldwell said of the operation.
© 2006 Agence France-Presse
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