The latest explosion came hours after multiple blasts were heard across the Iraqi capital, where a witness told AFP he saw detonations likely caused by air defences intercepting projectiles over the embassy.

Diners at a restaurant in the city seemed undisturbed by the initial sounds of the blasts.

Another witness saw a fire on the edge of the embassy grounds from her balcony, and a security official said the blaze was caused by a drone.

"The embassy was the target of a drone and rocket attack," the official said, speaking on condition of anonymity.

Another drone, targeting a US diplomatic and logistics centre at Baghdad's airport, was shot down, according to another security official.

Hours later, an AFP journalist heard another explosion, with a security official saying "a drone directly hit the embassy".

The official did not specify whether there had been any casualties or damage.

A second official said a drone fell "near the embassy's security fence".

Prime Minister Mohammed Shia al-Sudani condemned a "blatant terrorist assault" by unnamed "outlaw groups".

Sudani had urged security forces "not to show leniency" in tracking down those responsible, according to a statement from the prime minister's spokesman Sabah al-Numan.

Earlier, the powerful Iranian-backed Kataeb Hezbollah group issued a statement demanding that every "foreign soldier" leave the country.

"Iraq's instability is due to the malicious American presence, and security will not be achieved until the last foreign soldier leaves Iraqi territory," said the group's newly named security chief Abu Mujahid al-Assaf.

He added: "Either everyone enjoys security, or no one does."

Iraq was drawn into the Middle East war after having long been a proxy battleground between the United States and Iran.

Strikes have targeted Iran-backed groups, which in turn have claimed daily attacks on US interests in Iraq and across the region.

In recent days pro-Iranian armed groups have carried out several attacks against the US embassy, located in a heavily fortified area of central Baghdad, and against the American diplomatic and logistics facility at the airport.