Iraq security forces yesterday raided the settlement of an Iranian exile group that the Shiite-led government has long tried to disband.
At least ten people were killed in the pre-dawn clashes.
The People's Mujahedeen Organisation of Iran exiles view prime minister Nouri al-Maliki as a puppet of Tehran, partly because the Shiite premier has sought to close their camp in Iraq's north-east Diyala province over their ties to former Sunni dictator Saddam Hussein.
Tensions boiled over this week when the Iraqi army moved troops near Camp Ashraf, prompting its residents to pelt soldiers with stones and throw themselves in front of military vehicles. The army stormed the camp yesterday, hurling smoke bombs at a crowd of about 100 masked people.
The exiles claimed 31 residents were killed, while the Iraqi general who ordered the raid denied that anybody died.
US and UN observers were unable to verify any casualties, but officials at a hospital in Baqouba, Diyala's capital, said ten people were killed and 39 wounded. Five Iraqi soldiers and a policeman were also injured.
Iraqi Lt-Gen Ali Ghaidan said he ordered the crackdown after his troops were provoked. But signaling the government's intention to edge out the exiles, he also said the military seized land and intends to give it to Iraqi farmers.
"Everything is normal inside the camp," Lt-Gen Ghaidan said. "Our troops are outside, and we are not near the residential areas."
But Ashraf resident Shahriar Kia said that was not true. "People are standing out on the street to protect their homes," he said.