Iran says the five Iranians detained by U.S. forces in Iraq last week are diplomats.
The U.S. military says the detainees are tied to an Iranian Revolutionary Guard group, the Qods Force that provides money and weapons to insurgents in Iraq.
An Iranian spokesman, Mohammad Ali Hosseini called the U.S. accusations "incorrect" and demanded the five be freed.
U.S. forces took the men into custody Thursday during a raid in the northern Iraqi city of Irbil. Iraq's government says the building raided was an Iranian liaison office in the process of becoming a consulate.
In other news, 16 Iraqis were killed in attacks across the country Sunday. The U.S. military says two U.S. soldiers were also killed in separate explosions.
Meanwhile, President Bush has acknowledged that U.S. decisions have contributed to instability in Iraq.
In a television interview (to be broadcast Sunday night in the U.S. on the CBS "60 Minutes" news magazine), Mr. Bush says history will find ways the United States could have done things better. But he says most Iraqis are grateful that the U.S. removed a tyrant, the former leader Saddam Hussein.