The friendly fire incident drew swift criticism of the US military presence in Iraq from pro-Iranian figures in Baghdad.

"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, a provincial 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.

Those killed were travelling in a convoy which had been deployed to support a dawn raid on suspected IS militants in the area.

Despite the government's declaration of victory over IS last month, the jihadists remain active underground in several regions of Iraq, particularly along the Euphrates Valley and in the vast desert to its west.

The US-led 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 country's 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."

- Investigations opened -

As the special forces troops withdrew 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, lamenting the lack of coordination.

"An inquiry has been opened," it added.

Coalition spokesman Colonel Ryan Dillon said the strike had been carried out at the request of Iraqi forces, who would take the lead in investigating any failings.

"Anything we do in Iraq is in support of the Iraqi security forces. We were asked for support and we provided it," Dillon told AFP.

"Iraqi forces have announced an investigation, they are on the lead for the investigation.

"For any allegation, especially of civilian losses, we conduct an investigation."

But leaders of the pro-Iran militias that form the backbone of the Hashed auxiliary force, which played a major role in the campaign against IS independently of the coalition, were unswayed by the explanation.

Populist Shiite militia leader Moqtada Sadr, who led repeated uprisings against coalition troops during the US-led occupation that followed the 2003 invasion, demanded immediate action against those responsible for the strike.

"Once again the American occupation forces have shown their tyranny and arrogance by flagrantly violating the independence and sovereignty of the Iraqi government," he said on Twitter.

Senior Hashed commander Qais al-Khazali, who heads the Asaib Ahl al-Haq militia, said the strike "raises serious and dangerous questions".

Those questions concern "the American military presence in Iraq, the role it intends to play and the justification for its presence after the military defeat of IS," he said on Twitter.