Kurdish fighters took the northern Iraqi oil city of Kirkuk, as US troops fought with diehard supporters of Saddam Hussein in Baghdad on Thursday.
There was no word on Saddam's fate a day after US forces seized Baghdad.
The Kurds captured Kirkuk virtually without a fight after Iraqi troops laid down their weapons or fled south towards Tikrit, residents said.
"It's under control," Mam Rostam, a commander from the Patriotic Union of Kurdistan, told Mike Collett-White of Reuters.
B-52 bombers bombed the city early in the morning, helping trigger the rout.
Hundreds of PUK peshmerga fighters flooded into Kirkuk, source of 40 per cent of Iraq's oil revenue. Iraqi Kurds consider the rich city to be their capital.
Kurdish forces also told Reuters they had occupied the town of Khanaqin, southeast of Kirkuk and only 120 km from Baghdad, after Iraqi troops fled.
US Lieutenant Mark Kitchens told Reuters that elements of the Republican Guard were gathering around the northern cities of Mosul and Tikrit, Saddam's birthplace and power base.
US planes were bombing those formations, he added.
Mosul is Iraq's third city, lying close to the 'green line' frontier with the Kurdish-controlled zone of northern Iraq.
In Baghdad, one US Marine was killed and more than 20 wounded in sharp clashes with Saddam loyalists firing from the Imam al-Adham Mosque northwest of the city centre.
"The fighting was fierce," said Captain Frank Thorp, a spokesman at US Central Command headquarters in Qatar.
War Not Won Yet
He said fiercer battles could be ahead. "There continues to be resistance and the overall objective of bringing down the regime has not yet been achieved. But it will be."
US planes bombed positions held by non-Iraqi Arab fighters in the western Mansur district of the capital, close to an Iraqi secret police building, a Reuters correspondent reported.
US Marines swept through a northeastern area in the early hours, blasting Saddam loyalists with artillery, mortar and machinegun fire. By dawn, only sporadic gunfire could be heard.
Marines used explosives on a statue of Saddam, blasting a hole in its groin, but leaving it standing.
Exuberance among many at Saddam's loss of power in Baghdad was tempered by uncertainty over Iraq's future.
"I couldn't sleep last night because I was worrying about what was going to happen to my country Who is going to rule us, the Americans or who?" said retired teacher Ali Suleiman.
Egyptian President Hosni Mubarak called for Iraqis to be allowed to govern themselves as soon as possible.
China said the United Nations should play the leading role in Iraq's post-war reconstruction.
France Hails Saddam's Downfall
France, which led opposition to the war in the UN Security Council, said it was glad Saddam's dictatorship was over and that humanitarian aid was now the priority.
"A dark page in history has been turned with the fall of Saddam Hussein's regime and we are delighted," French Foreign Minister Dominique de Villepin said.
"Together, we now have to build peace in Iraq and for France that means the United Nations must play a central role."
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