The Iraqi Defence Ministry said 50 militants were killed during an intense gunfight that lasted for hours and included US and Iraqi soldiers battling side by side with the back-up of American fighter jets and helicopters.

Major General Ibrahim Shaker, a spokesman for the Defence Ministry, said the operation was designed to "purge Haifa Street", a neighbourhood just north of the heavily fortified Green Zone that is a known base for Sunni insurgents in the Iraqi capital. He said 21 militants, including three Syrians, were captured. But US commanders said only three people were detained.

Meanwhile, 31 people were killed when their plane crashed while trying to land in foggy conditions near Balad, about 80 km (50 miles) north of Baghdad.

The Moldovan Antonov-26 plane took off from the Turkish city of Adana early this morning, carrying 30 construction workers and five members of crew, and after disappearing from radar screens, crashed near the main US military logistics hub in Iraq.

One person was injured in the crash and three are missing, a Turkish Foreign Ministry official said.

In Baghdad, police said fighting erupted when gunmen attacked Iraqi army checkpoints in the city. US forces sealed off roads and joined Iraqi soldiers in raids to capture insurgents.

"This area has been subject to insurgent activity which has repeatedly disrupted Iraqi Security Force operations in central Baghdad," US Lieutenant Colonel Scott Bleichwehl said in a statement announcing the launch of an operation around Haifa Street. "Joint forces reported receiving small arms fire, rocket-propelled grenade and indirect fire attacks during the operation."

As it struggled to bring order to Baghdad, the Iraqi Government said today it would welcome an extra 20,000 US troops in the country — a move that is expected to be announced by President Bush tomorrow as part of his new strategy in Iraq. The troops are expected to be split between the Iraqi capital and unstable western province of Anbar.

Ali al-Dabbagh, a government spokesman, said: "The Iraqi government does not object to an increase in coalition forces. The Iraqi government supports this trend."

Nouri Al-Maliki, the Prime Minister, announced a major security plan for Baghdad on Saturday, vowing to tame the city by taking on all illegal armed groups "regardless of sect or politics".

Fighting broke out in Haifa Street hours after the Prime Minister's announcement, with the military killing 30 insurgents that night. Police said they discovered the bodies of 27 people, thought to be Shia Muslims, who had been tortured and dumped in the street earlier that day.

Iraqi state television reported that eight militants, including five Sudanese fighters, were captured close-by.

American and Iraqi forces have already carried out operations in the past two weeks against elements of Hojatoleslam Moqtada Sadr's al-Mahdi Army militia. A few commanders have been detained and one member of Mr al-Maliki's Dawa party said the Government had authorised targeted raids against the militia's rogue elements.

• The UN refugee agency made an emergency appeal for $60 million (£31 million) today to assist to help the 40,000 to 50,000 Iraqis who flee their homes every month. Around 3.7 million Iraqis are believed to have left their homes since the US-led invasion in 2003 and the number of internally displaced people in Iraq is expected to reach 2.3 million by the end of the year. The UNHCR described the movement of people as the biggest refugee crisis in the Middle East for 50 years.

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