At least seven Iraqi Catholics died on Sunday when police stormed a Baghdad church where gunmen were holding dozens of parishioners hostage, threatening to kill them if al Qaida-prisoners were not released.
The U.S. military said between seven and 10 hostages and seven members of the Iraqi security forces, as well as five to seven attackers, were killed in the rescue operation.
Witnesses reported seeing many bodies inside the church after the gunmen wearing suicide vests threw grenades or blew themselves up as Iraqi forces stormed the building.
The insurgents laid siege to one of Baghdad's biggest churches as more than 100 parishioners attended Sunday mass in a central district near the heavily fortified Green Zone, home to embassies and the Iraqi government.
U.S. military officials watched the rescue operation from cameras in hovering helicopters.
Lieutenant Colonel Eric Bloom, a U.S. military spokesman in Baghdad, said three militants detonated suicide vests as Iraq forces entered the church. He said a total of 120 hostages were held by the assailants, adding that 30 people were wounded.
Colonel Kadhim Basheer Saleh, an Iraqi civil defense spokesman, said 15 civilians, four policemen and eight attackers were killed.
Al-Qaida's Iraqi affiliate, the Islamic State of Iraq, claimed responsibility for the attack on "the dirty place of the infidel which Iraqi Christians have long used as a base to fight Islam."
It said in a statement posted on radical Islamic websites that it was an action against the Christian church in Egypt.
Violence has fallen sharply in Iraq since the height of sectarian bloodshed in 2006-07 but attacks by Sunni insurgents linked to al-Qaida and Shiite militia continue daily.
The failure of Iraqi leaders to agree on a new government almost eight months after an inconclusive election has stoked tensions just as U.S. forces cut back their presence and end combat operations ahead of a full withdrawal next year.
Iraqi security officials said they had been warned of possible attacks against large gatherings, especially churches.
"We expect attacks will continue and increase in the coming days," said Lieutenant General Hussein Kamal, Iraq's deputy interior minister.
As Sunday's operation unfolded, military helicopters flew low overhead and gunfire rang out through the densely populated residential area. Streets around the Assyrian Catholic church were quickly cordoned off.
A Christian woman who was held hostage in the Our Lady of Salvation Church told Reuters there were many bodies inside.
"While I was trying to find my way out, in the dark, I walked over bodies," she said, asking not to be identified. "There are many bodies there."
A federal police source said the attackers demanded the release of al-Qaida prisoners, including the widow of Abu Omar al-Baghdadi, the former head of the Islamic State of Iraq, who was killed in April.
In a separate call to al-Baghdadiya television station, a man who claimed to be one of the attackers said the group also wanted al-Qaida prisoners released in Egypt.
Some police sources said they believed the initial target was the nearby Iraqi stock exchange, a bourse that lists a couple dozen local companies.
Our Lady of Salvation, one of Baghdad's largest churches, was one of five churches in Baghdad and Mosul hit in coordinated attacks in August 2004 in which 12 people were killed.
Christians number about a 1.5 million out of a total Iraqi population of about 23 million, the vast majority of them Muslims. Christian denominations include Chaldeans, Copts, Roman and Melkite Catholics, Maronites and Greek Orthodox.