The Iraqi government, supported by pro-Tehran factions, decried an "aggression". It accused a US-led international coalition but stopped short of pinning the blame on Washington, as regional tensions soar amid the Israel-Hamas war.

"A drone targeted the logistical support headquarters of Hashed al-Shaabi," mainly pro-Iranian former paramilitary units integrated into the Iraqi armed forces, said the security official.

The strike killed "two members and wounded seven others", said the official, speaking on condition of anonymity.

A Hashed source, also asking not to be named, confirmed the death toll and charged that the United States was behind the attack.

Harakat al-Nujaba, one of the Hashed's factions, said in a statement that "the deputy commander of operations for Baghdad, Mushtaq Talib al-Saidi", had been "martyred in a US strike".

Contacted by AFP, a US official neither confirmed nor denied that Washington was behind the strike.

"The United States is continuing to take action to protect our forces in Iraq and Syria by addressing the threats they face," said the official, who also spoke on condition of anonymity.

The strike came amid heightened regional tensions since war broke out between US ally Israel and Iran-backed Hamas militants in the Gaza Strip, triggered by the Palestinian group's deadly October 7 attack.

US forces in Iraq and neighbouring Syria have faced a surge in attacks since the start of the Gaza war.

Videos shared on a Telegram channel linked to the Hashed showed columns of smoke rising above the area of the strike on Baghdad's Palestine street, normally a bustling commercial road.

The site was cordoned off by Hashed forces, who blocked journalists' access to the site, an AFP photographer said.

- 'Blatant aggression' -

Iraqi Prime Minister Mohammed Shia al-Sudani's office accused the US-led anti-jihadist coalition of the strike, labelling it "a blatant aggression" as well as "a dangerous escalation and assault".

"The Iraqi armed forces hold the global coalition forces responsible for this unwarranted attack," a spokesperson for Sudani said in a statement.

Hadi al-Ameri, a senior Hashed commander, condemned what he described as a "heinous crime committed by the criminal American forces", demanding the "immediate departure" of the international coalition.

Washington has counted more than 100 attacks against US targets in Syria and Iraq since mid-October.

Many have been claimed by the Islamic Resistance in Iraq, a loose alliance of Iran-linked armed groups that oppose US support for Israel in the Gaza war.

The United States has around 2,500 troops in Iraq and 900 in Syria as part of the multinational coalition fighting the Islamic State group since 2014.

The US military has responded to recent attacks by launching air strikes targeting sites used by Iran and its proxy forces in Iraq and Syria, including Hashed sites.

A US drone strike in Baghdad four years ago killed Iran's Revolutionary Guards general Qasem Soleimani, whose commemoration on Wednesday in southern Iran was hit in a bomb attack claimed by the Islamic State.

Soleimani headed the Quds Force, the foreign operations arm of the Islamic Revolutionary Guard Corps, overseeing military operations across the Middle East.

The twin blasts in the southern Iranian city of Kerman on the anniversary of Soleimani's death killed at least 84 people, according to Iranian authorities.