A British paratrooper who was involved in a raid to seize suspected terrorists from a house in Basra was shot during a gun battle yesterday and died from his injuries.

The raid was part of Operation Sinbad, in which British troops have been trying to clean up the city and arrest suspected terrorists and Shia militia extremists before handing over control of Basra to Iraqi forces in April.

Defence sources said that the unit to which the paratrooper was attached had gone to a specific house in Basra after intelligence was received on the location of suspected terrorists. Seven men were seized.

A large number of troops are understood to have been involved, perhaps as many as 600. Most were used to set up a cordon around the house before it was stormed by a smaller unit. Special forces are likely to have been involved in seizing the suspects.

The paratrooper who was killed was not with his Parachute Regiment battalion but had been sent to Iraq on attachment. The Ministry of Defence gave no further details of the dead soldier. His name will be released later today.

Members of the 1st Battalion The Parachute Regiment are part of a recently formed Special Forces Support Group that provides back-up to the SAS. The MoD said that the soldier had been shot during a search-and-detention operation.

“The soldier sustained gunshot wounds during the operation and was evacuated to a nearby military hospital but . . . he died later from his injuries,” a spokesman said. The killing of the soldier raises the British death toll in Iraq to 126, of which 96 were as a result of enemy action.

Operation Sinbad has been running for several weeks and is not due to be completed until the end of February. Basra has been divided into 18 sections and each is being flooded with troops and reconstruction teams to try to improve the security and well-being of the city. It is part of Britain’s exit strategy from Iraq.

One of the key ingredients of the operation has been to seek out and detain suspected terrorists and insurgents, who have been attacking military patrols and civilians. The intelligence on the house in Basra was acted on immediately because it said that more than half a dozen suspects were living there. The shooting took place as the suspected terrorists tried to escape, defence sources said.

Margaret Beckett, the Foreign Secretary, told the Commons this week that it was hoped that the security responsibility for Basra could be handed over to the Iraqi forces by next Spring.

A young soldier from Bristol who had returned recently from serving in Basra and Baghdad is thought to have taken his own life after he was found on a firing range with a single bullet wound to the head. Guardsman Ian Wright, 20, of the 1st Battalion Grenadier Guards, died on Tuesday.

• Lord Drayson, the Defence Procurement Minister, said that he was unaware of ammunition shortages or equipment problems in Afghanistan after claims by a Royal Marines sergeant that troops in Helmand province did not have enough grenades, night-vision equipment or armoured vehicles.

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