US commanders insisted the assault was only a "raid through the city" and not the beginning of an all-out battle for control of Baghdad, one of the last prizes in the US-led coalition's war to topple Saddam and his inner circle.

South of the capital, at least six US soldiers were wounded, one of them critically, and another six unaccounted for in a rocket attack on a US position.

Even after more than 100 US tanks and troops had forced their way inside the gates of the Republican Palace, Iraq's defiant information minister told reporters on the streets that no US troops were in the war-battered city.

Huge explosions boomed out and thick smoke covered the massive palace compound along the banks of the Tigris river. A handful of US marines were seen inside the complex, where US tanks and armoured vehicles were parked outside the gates.

"The war of words is over," said Captain Frank Thorp at the US Central Command base in Qatar, dismissing the claim by the Iraqi minister, Mohammed Said al-Sahhaf.

He told AFP that US forces had "stopped and visited" the Republican Palace compound, where Saddam has a personal underground bunker built to withstand a nuclear bomb attack. "This is an armoured raid through the city," he said.

An officer on the ground had earlier said that "we own" three palaces, including the Palace complex.

The US military normally refuses comment on current operations but Major Rumi Nielson-Green said Central Command was speaking out because of the dramatic footage from reporters with the troops being broadcast round the world.

"We're confirming the obvious," she said. She also confirmed that there were still "pockets of resistance" at the Baghdad airport outside the city, which the US-led coalition seized last week.

Major Mike Birmingham, spokesman for the 3rd infantry division, said that a rocket attack had hit a 2nd Brigade tactical operations centre. The 2nd Brigade was involved in the raid through Baghdad.

"We have six wounded in action, six missing in action," he said, adding that one of the wounded is in a critical condition.

Lieutenant Colonel Peter Bayer, operations officer for the US army's 3rd Infantry Division, said at the airport that his troops had been to two palaces in the city centre and a third by the airport.

At the Republican Palace, an arms depot had caught fire. Fuel trenches inside the compound were set ablaze, presumably to foil US warplanes now flying unchecked over the capital around the clock.

As the fighting raged, the streets were all but deserted. Almost all central shops were closed, and the station for buses out of Baghdad was empty.

Warplanes had flown over the city all night, sometimes at low altitude, without bombing any targets.

US troops were meanwhile moving to encircle Baghdad to prevent any escape from the city by its defenders.

Major Ross Coffman said the 3rd Infantry Division had completed the western portion of the encirclement and was waiting for US marines to close the door from the east.

Brigadier General John Kelly, assistant commander of the First Marine Division, said troops had also crossed the Diyala River and entered Baghdad after Iraq blew up two bridges over the waterway.

In the deep south, an AFP reporter said hundreds of British soldiers moved into the centre of Iraq's second largest city Basra on foot Monday, seizing control of the university from Iraqi militiamen. A dozen dead Iraqi militiamen fighters lay on the ground.

British Defence Secretary Geoff Hoon said British troops were in Basra "to stay."

He also said London had "strong indications" that Chemical Ali, a cousin of Saddam Hussein blamed for a gas attack on Kurds in 1988, was killed in an allied raid on Saturday but that his death could not be confirmed.

Forces from the US 101st Airborne Division meanwhile secured the central city of Karbala, killing 400 Iraqi paramilitaries as they crushed resistance from about 500 Saddam loyalists, division spokesman Major Hugh Cate told AFP.

Officers said fewer than 100 Iraqis had been taken prisoner while almost all the rest were killed in a battle that saw intensive house-to-house searches.

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