By Ross Colvin

BAGHDAD, May 26 (Reuters) - U.S. and British forces battled Mehdi Army fighters in Baghdad and the southern city of Basra after their leader, Shi'ite cleric Moqtada al-Sadr, made a rare public appearance and called on U.S. troops to get out of Iraq.

Five gunmen were killed in an air strike during a pre-dawn raid on Saturday in the cleric's Sadr City stronghold in Baghdad to capture a militant leader suspected of ties to Iran's Revolutionary Guards, the U.S. military said in a statement.

In the southern oil hub of Basra, the British military said "a number" of militia fighters were killed in an air strike overnight after Mehdi Army militia fighters attacked British troops with rocket-propelled grenades, mortars and machineguns.

The attacks were believed to be in retaliation for the killing of the top Mehdi Army commander in the city on Friday by British-backed Iraqi special forces, British military spokesman Major David Gell said in a statement.

A Reuters reporter saw eight caskets at a funeral for those killed in Basra. A hospital official said 22 others had been wounded. Residents said a helicopter had attacked a group of civilians protesting against the death of the Mehdi Army leader.

The fighting came a day after Sadr appeared in public for the first time in months and repeated his demand for a timetable for U.S. troop withdrawal. U.S. officials say he has been in hiding in Iran, but his aides say he never left Iraq.

Some analysts and U.S. military officials have speculated that Sadr had come back to reassert his authority over his militia, which some say has begun fragmenting.

On Friday, Sadr sought to portray himself as a nationalist leader, offering to work with minority Sunnis, calling on his militiamen to stop fighting Iraqi forces, and criticising Prime Minister Nuri al-Maliki's government for failing to deliver security and basic services.

His return comes ahead of rare talks between the U.S. and Iranian ambassadors to Iraq on Monday on how to stabilise the country. The United States accuses Iran of fuelling sectarian violence with its support for Shi'ite militias such as Sadr's Mehdi Army. Tehran denies the charge.

"CALM BUT TENSE"

The U.S. military said the militant leader detained in the Sadr City raid was "suspected of ... acting as a proxy for an Iranian Revolutionary Guards Corps officer".

The military detained five Iranians in Iraq in February and accused them of being members of the Revolutionary Guards Qods Force. Tehran says they are diplomats and wants them released.

The five suspected gunmen were killed when an air strike hit a column of nine vehicles that were positioning themselves to ambush U.S. and Iraqi troops, the military said in a statement.

But residents and police said the cars had been queuing at a petrol station. A Reuters reporter counted at least 11 burnt-out vehicles about 1 km from the station. Lengthy petrol queues are common in Iraq.

"A plane came and started bombing the cars queuing for petrol and the hospital," said a guard at Habibiya maternity hospital, which was also hit in the attack.

Police said two people were killed and five wounded.

"The individual detained ... is believed to be the suspected leader in a secret cell terrorist network for facilitating the transport of weapons and explosively formed penetrators, or EFPs, from Iran to Iraq as well as bringing militants from Iraq to Iran for terrorist training," the U.S. military said.

In Basra, the British military described the situation as calm but tense on Saturday after overnight fighting.

Gell said British forces had responded "robustly" to attacks on their positions, using "a number of appropriate and proportional assets ... including a low-flying aircraft".

British troops have stepped up operations against Shi'ite militias in Basra recently as they prepare to hand it over to Iraqi security forces. Britain is preparing to reduce its 7,000-strong force to about 5,500 within the next few weeks.

(Additional reporting by Mussab Al-Khairalla and Paul Tait and Aref Mohammed in Basra)

AlertNet news is provided by