Eleven Marines died during an engagement with anti-US insurgents for more than seven hours Tuesday. Another died from wounds suffered during the firefight in the town of Ramadi, a marine statement said.

It was the highest single-day casualty toll suffered by US forces since the beginning of the year.

It brought to 628 the number of US soldiers killed in action in Iraq since the US-led coalition invaded the country in March 2003 to oust president Saddam Hussein's regime, according to an AFP toll.

Thirty Iraqis were killed and 25 wounded during overnight clashes in Fallujah between Sunni Muslim insurgents and the US marines, hospital sources and residents said Wednesday.

The marines have launched a major operation dubbed "Vigilant Resolve" to flush out insurgents who killed four American contractors here last week.

The operation involves two marine battalions, or more than 2,000 troops, based near this Sunni Muslim stronghold that has been a bastion of anti-US insurgency since the ouster of Saddam Hussein's Sunni-dominated regime a year ago.

As the US offensive here entered its third day, a marine officer said Wednesday that insurgents were using mosques to fire on US forces and to hide weapons.

At 10:15 am (0615 GMT), 200 marines were engaged in a major firefight with the rebels around a Fallujah mosque.

Heavy rocket and machine-gun fire could be heard while black smoke billowed into the air as marines took cover behind abandoned metal shops and debris in the streets.

"I think this is worst than the first one (the war last year)," said Richard Savick, a veteran of the Gulf War.

Marines were using aggressive tactics to draw out the insurgents and then chase them.

"We chased them; we keep it as aggressive as possible," Corporal Jay Picard.

Tuesday night, marines picked up a man identified as "Khalil the rocket man", who is wanted for selling rockets.

"The order for his arrest came from high up," the officer said, indicating that the suspect was on a list of individuals the marines were hoping to capture in their operation.

The suspect was arrested along with four other people during a search of his home but nothing was found, the officer added.

Meanwhile, marines were handing out posters showing pictures of six men who were at the scene of the murder of the contractors with the sign "Wanted" written in large Arabic script.

"If you see these people, call this number," said the posters which show one of the suspects holding a sign saying "Fallujah will be the cemetery of the Americans."

Overnight, firing from helicopter gunships could be heard.

Marines battled guerrillas wearing black fatigues or civilian clothes, with their faces shrouded by headscarves, after tanks, amphibious assault vehicles and Humvees rolled into the western Iraqi town at 1:00 am TuesdayMonday).

All day Tuesday, the sounds of exploding mortar rounds and of machine-gun fire shook the city as the insurgents ran in packs of four or five, appearing out of alleys and on roof tops, spraying bullets and shooting off rocket-propelled grenades (RPGs).

WAR.WIRE