The self-styled Islamic State in Iraq denied that leader of Al Qaida in Iraq, Abu Ayyub Al Masri, also known as Abu Hamza Al Muhajir, was killed on Tuesday.

"The Islamic State in Iraq assures the Islamic nation about the safety of Sheikh Abu Hamza AL Muhajer, may God save him, and that he is still fighting the enemies," said the Al Qaida linked group in a statement posted on a Web site used by militants.

A spokesman for the Iraqi Interior Ministry had said earlier on Tuesday that Al-Masri was killed in an internal fight between insurgents north of Baghdad.

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Brigadier-General Abdul Kareem Khalaf told Reuters "we have definite intelligence reports that al Masri was killed today". His statement was confirmed by another source in the Interior Ministry.

Khalaf said the battle happened near a bridge in the small town of al-Nibayi, north of Baghdad.

Both Khalaf and ministry source said the authorities did not have Masri's body. The U.S. military said it could not confirm the reports.

"I hope that it is true, but we want to be very careful to make sure," said Lieutenant-Colonel Christopher Garver, a spokesman for the U.S. military in Iraq.

There has been increasing friction between Sunni Islamist Al-Qaida and other Sunni Arab insurgent groups, for the most part provoked by Al-Qaida's indiscriminate killing of civilians in Iraq.

Masri, who is also known as Abu Hamza al-Muhajir, assumed the leadership of Al-Qaida in Iraq after Jordanian militant Abu Musab al-Zarqawi was killed in a U.S. air strike in June 2006.

U.S. and Iraqi officials accuse Al-Qaida of trying to tip Iraq into full-scale civil war between Iraq's majority Shiites and minority Sunni Arabs with a violent campaign of car bomb attacks that have killed thousands.

Iraqi officials also blame Al-Qaida for destroying a holy Shiite shrine in Samarra a year ago, an act that prompted a wave of sectarian bloodletting.

The U.S. military commander in Iraq, General David Petraeus, said last week that Al-Qaida is now "probably public enemy number one" in Iraq.

Masri, an Egyptian, has been described by the U.S. military as a former close Zarqawi associate who trained in Afghanistan and formed Al-Qaida's first cell in Baghdad.

The United States has a five million dollar bounty on Masri's head.