"Suspected Kataeb Hezbollah terrorists were killed in the operation" overnight, a US army statement said, at Ali ash-Sharqi, a village near the Iranian border and 265 kilometres (165 miles) from the Iraqi capital.
"While the number of casualties has not yet been confirmed, initial reports indicate five individuals were killed."
A security official in Amara, the capital of Maysan province, where the incident took place, said seven people had been killed and two others wounded in an exchange of fire involving American forces.
Intelligence information led "Iraqi security forces and US advisers to the village … in search of known weapons cache sites," the US statement said.
"While approaching the village, the joint security team was fired upon by individuals. In response to the threat, members of the security team returned fire, killing individuals assessed to be enemy combatants."
The US military also said 22 arrests were made during a series of joint security operations targeting Kataeb Hezbollah (Party of God Brigades), a Shiite insurgent group which smuggles arms and carries out rocket attacks.
Electric circuits used to detonate homemade bombs, assault rifles and other military equipment were seized, it said.
"The Iranian-backed terrorist organisation continues to conduct and claim responsibility for attacks resulting in civilian deaths," the US military said, referring to Kataeb Hezbollah.
