The launch of the operation on Tuesday was followed by a massive truck bombing at a Shiite mosque in Baghdad that left at least 87 people dead, according to the latest toll from security and hospital officials.

Around 7,500 US troops and 2,500 Iraqi forces poured into the provincial capital of Baquba in the largest assault ever launched in the Diyala province, which has seen intense fighting in recent months.

The offensive, which involves ground forces, helicopters, and heavily-armoured vehicles, is the largest single assault since US forces invaded the western city of Fallujah in November 2004.

"These criminals will know no safe place to hide in Diyala," said Brigadier General Mick Bednarek.

"The people of Diyala are tired of the terror and violence these Al-Qaeda thugs have brought to their province and are cooperating with us in order to root them out."

In addition to killing 30 suspected Al-Qaeda militants, US and Iraqi forces uncovered several weapons caches, including four homemade bombs in homes and another 10 bombs buried underground, the US military said.

Two suspected militants were killed while planting roadside bombs in a village outside of Diyala, the statement added.

Iraqi army and police forces are also participating in the assault.

"Our forces killed 11 terrorists and arrested 12 in Baquba. We also confiscated weapons and equipment, including swords used for cutting off people's heads," Army Colonel Najib al-Salahi told AFP on Tuesday.

"This operation is just beginning and we will continue to strike Al-Qaeda no matter where they hide and we won't rest until the job is done," added Bednarek.

As US and Iraqi reinforcements have surged into Baghdad in recent months, insurgents have retreated to areas around the capital, particularly Diyala province, where the US military has not until recently had a large presence.

The new strongholds have allowed militants to mount a deadly drumbeat of attacks in Baghdad. On Tuesday a truck bomb loaded with explosives and gas canisters detonated outside a Shiite mosque, killing at least 87 people.

The attack, which wounded at least another 242 people, was the worst attack in the capital in two months.

At the same time, insurgents in Diyala have carried out increasingly sophisticated attacks, often combining ambushes, roadside bombs, and snipers, making the area in and around Baquba one of the deadliest places in Iraq.

At least one US soldier was killed in fighting in the Diyala province on Tuesday, the US military said.

"One Task Force Lightning Soldier died as a result of injuries sustained from an explosion near his vehicle while conducting operations in Diyala province," it said, adding that two other troops were wounded in the blast.

The US military also announced the death of another soldier in a roadside bombing south of Baghdad on Monday, in an attack that wounded three other troops.

The deaths took the military's losses to 45 during this month alone and to 3,522 since the March 2003 invasion, according to an AFP count based on Pentagon figures.