Fifteen US soldiers were killed and 21 wounded when their transport helicopter was struck by a missile and crashed in the deadliest day in Iraq for US forces since the end of the war.
The CH-47 Chinook helicopter, carrying troops going on leave after months in the troubled country, made a crash-landing in a field of wheat near the town of Fallujah.
Witnesses described how the twin-rotary helicopter was hit by one of two surface-to-air missiles fired at it shortly after taking off from a nearby airbase.
This attack was the second deadliest since the US invasion of Iraq, with only the 28 soldiers killed on the third day of the war surpassing yesterday's toll.
Responding to the news, US Defence Secretary, Mr Donald Rumsfeld, said the US would continue its war on global terror and efforts to stabilise Iraq.
"Clearly it is a tragic day for Americans," he said.
"In a long, hard war, we are going to have tragic days."
The chief US administrator for Iraq, Mr Paul Bremer, vowed that US-led coalition forces would not be "deterred".
US military officials have repeatedly warned that hundreds of surface-to-air missiles remain unaccounted for in Iraq.
Insurgents have fired on US aircraft before, downing two helicopters but without causing any casualties.
The lack of accounting for the missiles is the primary reason why Baghdad's airport has yet to open, with six surface-to-air missiles fired at flights chartered by the Coalition Provisional Authority. At the site of yesterday's attack, Iraqis expressed delight. "Tonight we will have a double feast," said one local resident
"The first feast will be when we will break our fast for Ramadan. The second will be in praise of those who struck down our American enemies."
A US spokesman said two Chinooks had been heading for Baghdad airport when one was "shot down by an unknown weapon".
A witness, Dawoud Suleiman, said: "There were two American helicopters. They fired a missile at one and missed, and then they hit the other, which crashed and caught fire."
Some US officials questioned why the helicopters had been flying through such a dangerous area.
The downing of the helicopter was just one of a number of attacks on US forces in Iraq yesterday.
One US soldier was killed in a bomb attack in Baghdad and two American civilian contractors died in a roadside mine blast in the town of Fallujah, a fiercely anti-US centre 50 km west of the capital.
Fallujah lies within the "Sunni triangle" - a hotbed of tribal resistance to the US-led occupation and the scene of daily attacks on US forces
A total of 138 American troops have now been killed in attacks since President Bush declared major combat operations over on May 1st - more than died during the war itself.
Attacks on coalition troops and those associated with occupation forces, coincided with the start of the Muslim holy month of Ramadan.
Last Monday suicide bombers who targeted the International Committee of the Red Cross and three police stations across Baghdad left dozens dead and more than 200 injured.
Recent attacks have shown an increased sophistication suggesting that the resistance to the US-led occupation may be growing more organised.
US officials have pointed the finger at both Saddam Hussein and one of his top aides as masterminding an alliance between Baath party loyalists and a recent influx of foreign fighters. The US State Department had warned that the weekend might see co-ordinated attacks on coalition forces.
Yesterday's incidents followed an announcement by Mr Bremer, that he want to accelerate the handover of authority to Iraqis.
Meanwhile, with just a year to go before the presidential election, Americans are evenly divided between President Bush and a Democratic challenger, according to a poll released yesterday in the Washington Post.
Support for Mr Bush has fallen to the point where 48 per cent of those surveyed said they would vote for him if the election were held today, while 47 per cent said they would vote for the Democratic Party's nominee, the Washington Post said. Some 5 per cent said they did not know.
Mr Bush's approval rating, which topped 90 per cent after the attacks of September 11th, 2001, was at 56 per cent, with 42 per cent giving him a negative review.
Mr Bush received better marks for his handling of the war on terror than for Iraq or his stewardship of the economy.
- (Additional reporting, Reuters)