"We definitely stumbled into a wasp's nest," Captain Jason Smith of the First Battalion-Fifth Marine's Bravo company said of the four-hour rescue launched around 4:00 pm (1200 GMT) Tuesday.

"There's definitely a lot more organized resistance out there," he said, adding that he believed his troops had killed some 20 fighters.

Smith described how two Amphibious Assault Vehicles (AAV) had tried to flush out snipers just beyond their lines in southeastern Fallujah, a Sunni Muslim bastion where a shaky five-day-old truce was extended for 48 hours Wednesday despite US air strikes and heavy clashes.

However, the mission went awry when the insurgents hit the AAVs with rocket-propelled grenades (RPGs), Smith said.

Desperate to escape the onslaught, one of the AAVs sped deep into the city's hostile southwestern area -- further than any marine platoon had ventured.

Between 50 and 100 insurgents starting firing RPGs and small arms at the errant AAV, whose engine burst into flames.

The 20 men inside the US vehicle took shelter in a house and set up defensive positions with M-16 assault rifles and SAW and GOLF machineguns, Smith said.

Rebels fired RPGs and lobbed hand grenades inside the house and the marines frantically threw them back out, Smith said.

The stricken AAV sent up a column of grey smoke into the sky, which the rescue team -- about 30 marines in six armoured humvees from a quick reaction force and four tanks -- used to locate its position.

Around 700 Iraqis, and more than 80 US soldiers, have been killed in fighting in Iraq over the past nine days, mostly in and around Fallujah.

WAR.WIRE