Rashad Galali, a Kurdish MP from Makhmur, told AFP the strike targeted "a kindergarten near a school" in the UN-supported camp that houses Kurdish refugees from Turkey.

"Three civilians were killed and two wounded," he said.

Earlier this week Erdogan compared Makhmur to the Mount Qandil region along Iraq's eastern frontier, where Turkey's outlawed Kurdistan Workers Party (PKK) has rear bases.

"The issue of Makhmur is as important to us as Qandil... because Makhmur has become the incubator of Qandil... and if we don't intervene the incubator will continue producing (terrorists)," he said.

"If the United Nations does not clean up this district, we will take care of it in our capacity as a UN member state," Erdogan warned.

Turkish troops have maintained a network of bases in northern Iraq since the mid-1990s on the basis of security agreements struck with the now-ousted regime of dictator Saddam Hussein.

The PKK has waged a rebellion in the mainly Kurdish southeast of Turkey since 1984 that has claimed more than 40,000 lives.

The PKK maintains rear bases in northern Iraq, from where they train their fighters and launch attacks on Turkey which has hit back with air attacks and the occasional ground incursion into Iraq.

Saturday's drone attack came hours after five Iraqi Kurdish peshmerga fighters were killed in a clashes with the PKK in the Mount Matin district of northern Dohuk province, an official said.

Serbast Lazkin, deputy minister for peshmerga affairs in Iraq's autonomous Kurdish region, said two peshmerga fighters were also wounded in the clash.

The People's Defence Forces (HPG), the armed wing of the PKK, accused the peshmerga of entering "a conflict zone in Matin" between it and Turkey "which wants to occupy Iraqi Kurdistan".

"These peshmerga movements are a stab in the back for the PKK and we refuse their entry into an area under our control," it said in a statement.

The PKK's pan-Kurdish agenda has often put it at odds with Iraq's autonomous Kurdish government, which has sought to maintain good relations with Ankara.

The peshmerga affairs ministry has called on "everyone to respect the borders of Kurdistan and to refrain from endangering its security and stability."

The federal government in Baghdad has taken a stronger line, condemning repeated air and ground incursions into Iraq by Turkish forces.