A car bomb killed 23 people and wounded 25 more in a market in the Iraqi town of Balad on Sunday, the U.S. military said.
A spokesman said the blast occurred near an Iraqi army checkpoint, adding the wounded were being rushed to hospital. Balad lies north of Baghdad.
The violence came as the U.S. military said impatience with slow improvements to basic services like electricity and water could reverse recent security gains in Iraq, especially Anbar province, a former al-Qaida stronghold.
Defense Secretary Robert Gates arrived in Iraq on Sunday for meetings with Iraqi officials and U.S. commanders to discuss U.S. troop levels in the light of improving security and to prepare talks on a pact that will define future relations between Washington and Baghdad.
Insurgents stormed two villages in northwestern Iraq on Sunday but were repelled by U.S.-allied fighters and Iraqi security forces in clashes that left at least 22 people dead, according to local authorities.
The attack began about 5 a.m. when about 25 carloads of heavily armed gunmen drove into the villages of Khams Tlol and al-Madina, about 50 miles west of Mosul, said Sheik Fawaz al-Jarba, a Sunni lawmaker and the head of the anti-al-Qaida group in Mosul.
He said villagers fought back against the militants, who were wielding rocket-propelled grenades, mortars and assault rifles, prompting clashes that lasted about five hours.
An Iraqi army officer in Mosul, who spoke on condition of anonymity because he wasn't authorized to disclose the information, confirmed the attack and said the fighting ended after Iraqi soldiers joined the battle.
Those killed included 10 militants and six members of the so-called Awakening Group in the area, as well as four women and two children, the officials said, adding that 10 civilians were wounded in the clashes.
The U.S. military in northern Iraq did not immediately respond to a request for comment.
'Essential services' lacking
With Iraq's Shiite-led government deadlocked on the 2008 budget and other major measures, U.S. military spokesman Rear Adm. Greg Smith said that Iraq needed to take advantage of security gains to improve the lives of Sunni Arabs.
"What's necessary to come behind security are essential services.... Part of that is through the central government's distribution of funds into the provinces," Smith told reporters.
"There will clearly be impatience with the level of support when you consider just how far many of these areas need to come in terms of employment and so forth," he said when asked if disaffected Sunni Arabs policing their own neighborhoods could become militias.
Millions of Baghdad residents still receive only fitful supplies of water and electricity after sectarian fighting and a Sunni Arab-led insurgency killed tens of thousands of Iraqis and devastated infrastructure.
Minority Sunni Arabs, dominant under Saddam Hussein, have long complained about being marginalized since Saddam's fall.
Washington has set a series of "benchmarks" it says are important to draw Sunni Arabs into politics and away from the insurgency.
But Prime Minister Nouri al-Maliki's government has been unable to make serious headway on many laws, such as allocating provincial powers and a measure on the oil industry, after the main Sunni Arab bloc walked out of the cabinet last August.
Lawmakers resolved a dispute on Sunday over allocations for the largely autonomous Kurdistan region, clearing the main obstacle holding up the $48 billion budget for 2008.
U.S.: Neighborhood units crucialThe U.S. military says attacks are down by 60 percent across Iraq since last June, with improved security credited in part to the growth of neighborhood police units pioneered by Sunni Arab tribal sheiks in Anbar who turned against al-Qaida in late 2006.
"Iraq's volunteer citizen groups have severely undermined al-Qaida," Smith said.
The neighborhood units have become a key component of the U.S. military's counter-insurgency strategy, which includes 30,000 extra U.S. troops who became fully deployed last June.
The U.S. military hopes about 20 percent of the roughly 80,000 volunteers will be integrated into the Iraqi security forces but many Iraqis fear they will turn their guns on Shiites if Iraq's sectarian clashes reignite.
Ten suspected al-Qaida insurgents were killed in clashes with local security volunteers in northern Iraq on Sunday, the U.S. military said. Five of the volunteers were also killed.
Smith said two documents captured during raids against al-Qaida showed neighborhood patrols had weakened the group.
"Improved security is paralyzing many al-Qaida security operatives, forcing them to sit idle, afraid to move.... Foreign terrorists are becoming disillusioned and disgruntled," he said.
The United States says al-Qaida is resorting to desperate tactics as it weakens, suh as using children and the mentally ill.
U.S. troops raided a hospital for the mentally impaired in Baghdad on Sunday, arresting a man for alleged involvement in two recent bombings they said had used mentally ill women.
Also on Sunday, a U.S. soldier was convicted by a court-martial of murdering an unarmed Iraqi man last May and then planting a gun on his body, the U.S. military said.