Four Americans were killed today when an explosion ripped through a Baghdad council meeting they were attending as part of efforts to boost reforms in Sadr City, one the capital’s most sensitive trouble spots.

The blast killed two officials attached to the US embassy and two soldiers guarding the meeting. Six Iraqis also died in the explosion and several more were wounded, including the deputy head of Sadr City’s council and two other council members.

The American military was quick to blame so-called Special Groups, Iranian-backed rogue cells of the Mahdi Army militia that controlled Sadr City for years before Iraqi government troops flooded the huge Shia slum last month as part of a deal to end heavy fighting there.

The attack targeted a morning meeting of the district advisory council, said Lieutenant Colonel John Digiambatista, a US Army commander. “This was the fourth meeting of this district council, led by hard working Iraqis determined to make a difference and set Sadr City off on the right path. Special Groups are afraid of progress and afraid of empowering the people,” he said

Soldiers arrested a suspect who was fleeing the building after the explosion, he said. The man tested positive for explosive residue.

The US military also blamed a huge blast last week in another mainly Shia area of Baghdad on the Special Groups, who are quickly replacing al-Qaeda as the routine suspect in such high-profile attacks.

Condoleezza Rice, the US Secretary of State, who has urged embassy staff to leave the relative safety of their fortified compounds and engage in a diplomatic ‘surge’ to accompany the military build-up of the last year, today phoned the US ambassador in Baghdad to discuss the implications of the attack.

The day before, two American soldiers and an Army interpreter were gunned down by an Iraqi local government employee in a dangerous area of southeastern Baghdad when emerging from a council meeting in which plans to build a town park were discussed. The assailant was shot dead by other US soldiers.

Today’s explosion appeared to be an attempt to derail efforts to restore municipal services to Sadr City, a neglected area which has been mostly calm since Iraqi forces took control in a deal brokered with the Mahdi Army, the unwieldy militia of Hojetoleslam Moqtada al-Sadr, a rebellious Shia cleric.

The slum area of northeast Baghdad is home to two million people, many of whom have welcomed the return to peace after years of militia control. While the al-Mahdi Army was initially set up to protect the area from Sunni bombers, it had increasingly imposed its own mix of gangland control and religious fundamentalism on the area’s population.

Hassan Athab, the mayor of Sadr City, told The Times the council had been meeting to hold regular elections.

“In this particular room all the council members usually gathers to discuss things so I guess that’s why this room was targeted,” said Mr Athab, who said the entire building was rocked by the explosion. He was in his own office just 50 yards away when it occurred.

“I suddenly heard a big explosion and the building was shaking. I ran with other officials towards that room and there was smoke and dust everywhere that we couldn’t even see anything,” he said.

The two deadly attacks came as a Pentagon quarterly report stated that violence in Iraq was at its lowest ebb in four years, but warned that the security gains of the past 12 months were “fragile, reversible and uneven.”

While daily attacks were down almost 70 percent on last June, another report showed that the Iraqi government was still lagging behind on a number of key progress indicators, such as supplying electricity and using its growing oil wealth to fund reconstruction.

It also noted that Iraqi armed forces, which took control of the southern cities of Basra and al-Amarah in recent months, were still heavily reliant of the US military.

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