A spokesman said a British convoy was returning from an arrest operation on Wednesday evening when it came across a roadblock that diverted it through the town of Ali Ash Sharqi in southern Iraq (news - web sites), about 200 km northwest of the city of Basra.
The soldiers from the 1st Battalion of the King's Own Scottish Borderers were confronted by a crowd of around 30 Iraqis and got out of their vehicles. A second crowd closed in on them from behind.
"The British soldiers fired two warning shots, and the crowd opened fire with small arms and rocket-propelled grenades," the spokesman said. "One soldier was fatally wounded and another was seriously wounded in the hand."
The spokesman said 10 Iraqis were arrested. The convoy returned to base with a helicopter escort.
The attack brings to 11 the number of British soldiers killed in action since major combat was officially declared over on May 1 in the war that ousted Saddam Hussein (news - web sites).
The British military identified the dead soldier as Fusilier Russell Beeston. It said he had died despite medical attention from his comrades while they were under fire.
"The thoughts and prayers of the battalion are with Fusilier Beeston's family," Major George Wilson, the acting commander of the battalion, said in a statement.
"He was a well-liked and respected soldier, highly regarded by his peers."