The helicopter strike took place near the town of Khalis in Diyala province, where 10,000 US and Iraqi troops have launched a massive air and ground assault, killing 55 alleged militants since the operation began on Tuesday.

The US military said the 17 militants were killed when helicopters observed a group of armed men trying to enter the town by circumventing Iraqi police.

"The attack helicopters, armed with missiles, engaged and killed 17 Al-Qaeda gunmen and destroyed the vehicle they were using," a statement said.

Since Tuesday, US and Iraqi forces have been battling street by street through the provincial capital of Baquba in the biggest offensive since the November 2004 onslaught on the former rebel town of Fallujah.

In the past several months, Diyala has emerged as the second most dangerous region in Iraq after Baghdad, with Baquba as the epicentre of sectarian and insurgent violence.

With the Baghdad security crackdown operational since February, insurgents have carried out increasing attacks against the coalition and Iraqi troops and civilians in a belt extending around the capital, the US military says.

Apart from a series of military sweeps targeting insurgents in Iraq, the US military is also arming local Sunni Arab tribes that have agreed to fight alongside US forces against the Al-Qaeda-led insurgency.

After expressing reservations about the strategy in an interview with Newsweek magazine earlier this week, Iraqi Prime Minister Nuri al-Maliki on Friday gave his cautious support to the US tactic.

"The government does not fear the arming of tribes but fears the chaos and disorder and the appearance of new militias," a statement from Maliki's office said.

"It is essential that all of these activities are under Iraqi control and done with government supervision. The government refuses to deploy these kinds of projects in a context that pits Sunni tribes against Shiite tribes."

Meanwhile, Lieutenant General Raymond Odierno, a top US commander in Iraq, said US troops in Iraq could see a reduction by early 2008 as local security forces grow stronger.

"If you ask me today, I think, by the spring or earlier, they (the Iraqis) will be ready to take on a larger portion of their security, which means, I think, potentially, we could have a decision to reduce our forces," he said.

"You know, I'm not ready to say that's true," he added in a video news conference with reporters in Washington.

"But if you ask me today, and the confidence I think I'm going to have in our success here, I think there's a good potential for that."

On the streets of Baghdad, troops continued to face savage attacks.

One more soldier was killed in Baghdad during combat operations on Thursday, the military said Friday.

Since Tuesday, the military has suffered heavy casualties with at least 15 servicemembers killed, mostly in roadside bombings on the streets of Baghdad.

At least 60 troops have been killed in Iraq this month alone, and 3,537 since the March 2003 invasion, according to an AFP count based on Pentagon figures.

In the western Anbar province, US forces killed a Libyan militant accused of attacking coalition and Iraqi forces and smuggling in 35 fighters from north Africa last month, the military said.

Hussain Awad Hussein Hawawi, also known as Bassim Abu Thabit, was killed on June 17 in a raid southeast of Karmah, near Fallujah, it said.

"This terrorist was identified after his picture was matched with a previous one taken during his detention in the Badush prison in Mosul. He had escaped from the prison on March 6."

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