A statement said the Iraqi army and members of a U.S.- backed Sunni Arab neighborhood patrol shot Abu Ghazwan as he hid in the grass near a house they were searching on Thursday in Tarmiya, north of Baghdad.

The patrol had been attacked with guns and a bomb in the house.

"While further searching the area, a (neighborhood patrol) member discovered a trail booby-trapped with grenades and an identified individual lying in the grass ... Ghazwan was killed as a result of ... small arms fire," the statement said.

U.S. forces later determined the dead man was the wanted militant who had been involved in financing al Qaeda operations and recruiting child soldiers, the statement said.

Al Qaeda militants have been in retreat since Sunni Arab tribal leaders turned against them and formed U.S.-backed neighborhood patrols that drove the Sunni Islamist group out of strongholds in western Iraq and Baghdad.

But they have kept a presence in northern Iraq and have shown themselves still capable of staging large-scale attacks.