A car bomb has killed at least 20 people and wounded dozens more in the Iraqi capital, Baghdad, police said.

The bomb was left in a parked car at a bus terminal in the mainly Shia district of Bayaa in south-west Baghdad, officials said.

The explosion tore through crowds of commuters waiting for buses during the morning rush hour, tearing vehicles open and injuring about 40 people.

The bomb comes amid a major security drive in and around the capital city.

In other developments:

• Relatives of 11 Iraqis killed by US troops in the village of Khalis last week have demanded compensation, and have called for the Americans to withdraw claims the men were from al-Qaeda;
• Twenty headless bodies without identification have been found on the banks of a stream near the Tigris river close to Baghdad;
• Three British soldiers were killed when a roadside bomb hit their patrol in Basra, in southern Iraq. A fourth soldier was wounded.

In Baghdad, about 40 vehicles, including buses, were set alight in the latest explosion, which occurred at 0815 (0415 GMT).

Police and medical officials said between 20 and 25 people had been killed and at least 40 injured.

'Arrowhead Ripper'

The US has poured thousands of extra troops into Baghdad and the surrounding area in an effort to curb bombings and sectarian killings.

About 10,000 US and Iraqi troops launched operation "Arrowhead Ripper" last week, trying to flush what the US called al-Qaeda militants out of Diyala province north-east of Baghdad.

There has been heavy fighting in the city of Baquba, where Brig Gen Mick Bednarek of the US 25th infantry division said at least 60 suspected al-Qaeda militants had been killed.

But US commanders have warned that Iraqi forces can not yet be relied on to hold territory captured from fighters.

Earlier this week, the White House predicted a "difficult" summer ahead in Iraq as militants "do their very best to try to create very spectacular acts of terror".

'Wrongful attack'

Separately, the US military said it was investigating the incident last week where an American helicopter attack killed 11 men and wounded eight others believing them to be al-Qaeda militants.

Survivors and residents of the village, Khalis, to the north of Baghdad have told the BBC that all those killed and injured were guards, recognized by local authorities.

The US military told the BBC that it considers the armed men to have been a militia conducting an offensive operation near Iraqi police. But they no longer described them as al-Qaeda.

The survivors of the attack said they were helping the police check a house believed to be used by fighters.

Neither US nor Iraqi forces had been told of a local watch program in the area, the BBC's Andrew North in Baghdad says.

PHOTO CAPTION

Video grab of burn-out bus in Baghdad