Negotiations between the interim Iraqi government and insurgent leaders who control Fallujah have broken down, Iraqi officials said Friday, as U.S. Marines and soldiers began final preparations to retake the city.

"A military operation is the last and only solution we have for the city of Fallujah," said Salih Kuzaie, a spokesman for the Defense Ministry. "The negotiations failed . . . . It seemed like the Fallujah people are helping the terrorists. Thus, the military solution will end the crisis." It was unclear when an offensive might begin.

A source close to Prime Minister Ayad Allawi, who was scheduled to return Friday night to Iraq from a diplomatic trip to Europe, said there was no longer any point to the negotiations, which have been proceeding sporadically for more than a month.

"We have a real problem here," said the source, who asked not to be identified in order to speak freely about the talks' status. "The people of Fallujah who come to negotiate are doing their best, and they spare no effort to reach a peaceful solution to their problem. But the problem is that they don't have the power to make the decision. The decision is controlled by people from outside Iraq."

Marine commanders said they were waiting for Allawi's go-ahead to launch a major operation. The goal would be to root out Iraqi insurgents and foreign fighters who have turned Fallujah into a hub for attacks against American forces and Iraqis aligned with the U.S.-backed interim government.

On Friday, a U.S. soldier from the 13th Corps Support Command was killed and five others were wounded by an attack at a base near Fallujah, the military said in a statement. The names of the soldiers were being withheld until their families were notified.

U.S. troops on Friday cordoned off the city, preventing fighters and residents from leaving. About 200 armored vehicles gathered in a desert south of Fallujah and the nearby village of Nuaimiya, witnesses said. In the north, Marines gathered in the Faruq cemetery and blocked a highway with concrete barriers.

U.S. troops blared a warning over loudspeakers into the city that anyone younger than 45 who was caught trying to leave the city would be detained.

Residents said that until now, unarmed insurgents and foreign fighters had been able to move freely out of the city to locations where they picked up weapons to use against American forces. If people had no weapons, U.S. forces had no basis to arrest them, military officials said.

A spokesman for the Shura Council of Mujaheddin, the self-appointed leaders of Fallujah, said fighters struck at some American troops on Friday as they began to surround the city.

"We were watching them, and when they arrived to a certain point we identified, we attacked them," said the spokesman, who gave his name as Abu Asaad. "This is an old military technique, which we used in 1986 in the Iran-Iraq war. We planned for this three days ago." The U.S. military had no immediate confirmation of the account.

U.S. warplanes continued to strike targets in Fallujah on Friday. In the early morning, a Marine aircraft used precision munitions to destroy a weapons cache, the statement said.

On Thursday night, U.S. planes destroyed an insurgent position in the southeastern part of the city and barricaded fighting positions in the northern part. The aircraft also eliminated an insurgent command post, the military said.

Also on Thursday, one U.S. soldier was killed and another was wounded when a roadside bomb exploded near Balad, north of Baghdad.

On the Ramadi-Fallujah road, American forces killed seven members of a family who were driving in their car, witnesses said.

Ahmed Salem, 52, a farmer, said he saw the driver waving to the Americans. "He was carrying a piece of cloth, but the Americans did not stop," Salem said. The driver altered the car's path "but they concentrated their shooting at him. When the car stopped, they went to see who was killed, they were surprised, and they started yelling at each other."

The Marines said troops fired on a civilian vehicle that did not stop at a checkpoint in Fallujah, killing an Iraqi woman and wounding her husband, according to a military statement. "Marines fire upon vehicles only as a last resort when verbal and visual warnings to stop fail. Such was the case today," the statement said.

It was not clear whether the two instances were the same and being reported differently by witnesses and the military.

Special correspondents Omar Fekeiki and Bassam Sebti in Baghdad contributed to this report.