"Eight people -- a senior intelligence official, five policemen and a woman -- were killed by a US strike on the centre of Al-Baghdadi," a town in western Iraq, the official said, asking not to be identified.

"It seems the strike was a mistake," the official said of the incident in the Euphrates Valley town, adjacent to the Ain al-Asad airbase 250 kilometres (160 miles) west of the capital.

The dead were travelling in a convoy which had been deployed to support an operation against suspected Islamic State group militants in the area.

The strike destroyed most of the vehicles in the convoy and also wounded 20 people, including the town's police chief, who was in a serious condition, the provincial official said.

Iraq's Joint Operations Command, which coordinates the campaign against IS, said it had ordered a special forces raid in the town after receiving intelligence of a "meeting to be attended by terrorist commander Karim al-Samarmad".

It said it had requested "air support from the international coalition".

"Once the terrorist was arrested and while troops were carrying out searches, a grenade was thrown from an adjacent building."

As the special forces troops returned to base, they ran into a convoy of police and paramilitaries of the Hashed al-Shaabi auxiliary force that had been sent to support them.

The convoy was composed of pick-up trucks and the returning forces mistook them for jihadists and called in a coalition air strike, the JOC said.

"An inquiry has been opened."