A U.S. helicopter airstrike on Wednesday night killed eight civilians, including two children, north of Baghdad, police officials said on Thursday.
Colonel Mudhher al-Qaisi, police chief in the town of Baiji, said the attack was on a group of shepherds in a vehicle in a farming area. Relatives said some of those killed were fleeing on foot after the U.S. military arrived in the area.
"This is a criminal act. It will make the relations between Iraqi citizens and the U.S. forces tense. This will negatively affect security improvements," Qaisi told Reuters.
A U.S. military spokeswoman, Lieutenant-Colonel Maura Gillen, said the helicopter fired after observing "suspicious activity." She said the driver had ignored warnings to stop.
The incident is the latest in a string of U.S. airstrikes in which civilians have been killed.
The U.S. military has been trying to soothe tensions with Baghdad over a U.S. soldier using a copy of the Koran, the Muslim holy book, for target practice.
United Nations officials have expressed concern at the number of civilians killed in airstrikes in Iraq and said more care must be taken in military operations to protect them.
The U.S. military said the Baiji attack was under investigation.
"Coalition forces regret the loss of innocent civilian lives," said Navy Captain Gordon Delcambre in a press statement. "Terrorists continue to show their disregard for human life by endangering children with their illegal and violent activities."