Clashes raged on overnight and sporadic gunfire continued into Sunday morning, when a curfew was imposed throughout the city. "There was an attack last night in Diwaniyah in which three rocket propelled grenade teams attacked... soldiers who were conducting combat operations," US-led coalition headquarters said in a statement.
Seven civilians were wounded in the clashes, one of them critically, local medics said. The US military reported no coalition casualties.
An Iraqi defense department official said the clashes erupted after a joint US-Iraqi force raided the home of Kifah Al Greiti, a local commander for the Mahdi Army of firebrand Shiite cleric Moqtada Al Sadr.
But military sources in Diwaniyah denied they had attempted to arrest the militia chief, insisting that a routine Iraqi army patrol had been ambushed, provoking a fierce gun and rocket-propelled grenade duel.
In August, Diwaniyah was the scene of fierce clashes between the Mahdi Army and the Iraqi army that resulted in at least 60 dead. There were occasional flare ups in September.
"Our reports currently indicate that a CF [coalition forces] tank was destroyed during clashes last night with insurgents," said a coalition spokesperson. "The tank destroyed was a M1A2 second generation Abrams."
US armored vehicles such as the Abrams are almost immune to the typical roadside booby-traps employed by Iraq's militias and insurgent groups, but commanders have warned that more sophisticated devices are being smuggled from Iran. According to US officials, in the region this technology is exclusively Iranian and only found in the possession of Shiite militias.
Coalition forces in Baghdad have recently been conducting exploratory forays into district near the Shiite militia bastion of Sadr City in Baghdad but have yet to receive Iraqi government approval for a full scale entry.
In other Baghdad violence, a senior officer in the Iraqi police internal affairs department was shot dead in Baghdad Sunday, just five days after an entire police brigade was accused of colluding with sectarian death squads.
Security officials identified the victim as Colonel Tamer Salman, assistant to the director of police internal affairs, an increasingly important unit at a time when the government is under pressure to purge disloyal officers.
Iraq's fledgling police force has been accused of taking sides in the country's increasingly brutal sectarian war, with Shiite-dominated units said to allow militia fighters to attack Baghdad's Sunni minority.
Other attacks around Baghdad Sunday included a mortar attack in Waziriyah in central Baghdad on a police patrol which killed one policeman and wounded another, as well as a bystander.
South of the capital in the restive Babil province, police discovered a corpse lying by the side of the road but when they attempted to move it, gunmen opened fire on them, wounding a policeman.
In Mussayib, a rain of mortars hit a residential neighborhood killing one person and wounding two. The central Iraqi province of Salaheddin witnessed the death of four civilians near former leader Saddam Hussein's home village when their car struck roadside bomb.
In Kirkuk, authorities confirmed that a curfew which had locked down the city Saturday had been lifted and in the course of their day-long operation Saturday, 150 people were arrested and 500 weapons were confiscated.
© 2006 Agence France-Presse