As the raid began, a vehicle attempted to break through a checkpoint set up to enforce a curfew on the neighborhood. When police fired at the car before it reached the checkpoint, it exploded, killing two people inside, U.S. military and Iraqi authorities said.
At the scene of the car bomb near Martyr's Bridge, which went off at about 12:15 p.m., witnesses described devastating carnage and burning wreckage.

A wounded Iraqi policeman is rushed to a hospital following the explosion of a car bomb in central Baghdad.
(Faleh Kheiber -- Reuters)
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Photo Gallery: Witnesses to a suicide car bombing Friday on Baghdad's oldest street
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Video: A U.S. airstrike hit a cluster of houses believed to be used by militant Abu Musab Zarqawi.
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Salah Ahmed, 54, a truck driver, was attempting to cross Martyr's Bridge to Haifa Street when he was stopped by Iraqi police. Eight police vehicles blocked access to the bridge, and police with guns were milling about, he said.
Ahmed said he had climbed out of his vehicle and perched on a wooden cart, waiting to be allowed across the bridge, when he saw three cars get turned away by the police. A fourth car, the Malibu, circled the Rasafi statue and kept going until it exploded, he said.
"I saw his face," Ahmed said, his knee bleeding from a shrapnel wound. "They didn't shoot at him. When the explosion happened, we were scared. We ran away to take cover."
About an hour after the blast, Ammar Ali, an Iraqi police officer, was still walking around in shock, his blue uniform shirt soaked with the blood of a colleague.
"We were protecting the Americans so nobody could get close to them," Ahmed said, his face stiff as he spoke. "But we were not as careful as the Americans. We should be more careful. We didn't think this would happen."
Another police officer, who gave his name as Hayder, stood nearby, angry and fighting back tears. "We ask the Iraqis to help us so we will be able to control the situation, get rid of the terrorists and live in peace," he said. "All the people who were killed were Iraqis."
Asked if he would quit, Hayder shook his head. "No, we know how dangerous this job is," he said. "These bombings will make us work hard to get rid of the terrorists."
Correspondent Rajiv Chandrasekaran and special correspondents Bassam Sebti, Luma Mousawi, Naseer Nouri and Omar Fekeiki contributed to this report.