Ambulances sped to the eastern side of the city, where U.S. airstrikes have frequently targeted safehouses used by members of Jordanian militant Abu Musab al-Zarqawi's network. Rescue workers picked up remains of the dead, witnesses said.
Four 500-pound bombs and two 1,000-pound bombs were dropped, the military said.
The military said the operation employed precision weapons and underscored the resolve of coalition and Iraqi forces "to jointly destroy terrorist networks within Iraq."
"U.S. jets shelled a residential house in the al-Shuhdaa neighborhood in Fallujah," said police Capt. Mekky Hussein al-Zaidan.
Dr. Diaa Jumaili of Fallujah Hospital said 10 bodies had arrived there, most of them dismembered.
U.S. forces have hit the area with four airstrikes since June 19, killing dozens. Al-Zarqawi, a Jordanian militant said to be connected to al Qaeda, is believed to be behind a series of coordinated attacks on police and security forces that killed 100 people only days before U.S. forces handed over power to an Iraqi interim government June 28.
Al-Zarqawi is also believed to be behind the beheading of two hostages, American Nicholas Berg and South Korean Kim Sun-il.
U.S. authorities Wednesday increased to $25 million the reward for information leading to his arrest, more than doubling the previous bounty of $10 million.
Also Monday, an Iraqi militant group calling itself "Islamic Response" said it had not killed a U.S. Marine Cpl. Wassef Ali Hassoun, whom it was holding captive, Al-Jazeera television reported. On Saturday a Web site posting claimed Hassoun had been beheaded. On Sunday, a second Web posting on another Internet site said Hassoun was alive.
The United States reported Hassoun, 24, missing after he did not report for duty at his base in Iraq on June 20. On June 27, Al-Jazeera broadcast a videotape showing Hassoun blindfolded along with a statement from militants threatening to kill him unless the United States released all Iraqis in "occupation jails." Militants held a curved sword over his head.
Also Monday, the interim prime minister said he would not interfere with an Iraqi tribunal's right to decide whether Saddam Hussein and his top lieutenants should be executed on war crimes charges, the Arab language television station Al-Arabiya reported.
Prime Minister Iyad Allawi said he was willing to abide by whatever the court decides in Saddam's trial, which is not expected to begin for months. Iraq assumed legal custody of Saddam from the United States last week and reinstated the death penalty, which had been suspended by U.S. occupation authorities.
"As for the execution, that is for the court to decide — so long as a decision is reached impartially and fairly," he said.
At Saddam's first court appearance Thursday, broadly outlined charges included the slaughter of Shiites during a 1991 uprising and a chemical weapons attack against Kurds in the northern city of Halabja.
Thousands of Kurds demonstrated Monday in Halabja, demanding that Saddam and one of his key lieutenants — Ali Hassan al-Majid, also known as "Chemical Ali" — be put to death for the gas attack that killed 5,000 people on March 16, 1988. Carrying photos of their slain loved ones, the marchers said they want Saddam to be tried and executed in their town.
"Every family in this city lost no less than five of its dear sons," said demonstrator Sabiha Ali, 50. "Therefore, we want to execute Saddam on the soil of the land."
Iraq has been wracked by lawlessness and violence since the fall of Saddam's regime 14 months ago.
The spokesman for militant Shiite cleric Muqtada al-Sadr tempered threats to continue fighting, saying Monday that his movement only planned to wage "peaceful resistance" against the interim government.
Iraq's oil exports were cut nearly in half as workers struggled to repair a key pipeline shut down after sabotage by looters, according to officials with the South Oil Co. and traders.
The looters, trying to steal crude oil for sale on the black market, breached one of Iraq's two key southern pipelines, said an SOC official, speaking on condition of anonymity.
A land mine Monday blew up along the main route to the southern city of Samawah, where Japanese troops are based, police said. No injuries were reported. The route is frequented by coalition forces.
In southern Iraq, insurgents fired rockets at a government building early Monday, but instead struck nearby homes, killing one person and wounding eight, police said. The attack targeted the province's main offices near the center of the Basra.
Interior Ministry officials also said two Iranians suspected of trying to detonate a car bomb were captured, but gave no details.
Iraqi officials have blamed foreign fighters and religious extremists for a wave of recent vehicle bombings. The attacks have led to fears that religious fanatics and Saddam loyalists may be joining forces against both the multinational force and the new government.
Iraqi government officials have suggested tough moves will soon be taken to combat the violence, but canceled a news conference Monday where they had been expected to announce a limited amnesty for insurgents and martial law in parts of the country.
CBS News Correspondent Kimberly Dozier reports American officials say they stand ready to help when the Iraqis decide how they want to start this fight
The news conference with Justice Minister Malik Dohan al-Hassan and Human Rights Minister Bakhtiyar Amin was postponed indefinitely. The government had canceled a previous news conference on the same topic.
Britain and Australia offered support Monday for the proposed amnesty offer.
Al-Sadr issued a statement Sunday from his office in the Shiite holy city of Najaf calling the new Iraqi government "illegitimate" and pledging "to continue resisting oppression and occupation to our last drop of blood."
But al-Sadr's spokesman in Baghdad, Mahmoud al-Soudani, clarified at a news conference Monday that the statement was not a call to arms. He said that many of al-Sadr's supporters in Baghdad had begun taking up arms again and he needed to correct their misperceptions.
"We are still committed to the cease-fire," al-Soudani said.
Al-Sadr previously had made conciliatory statements to Allawi, a fellow Shiite, and members of his movement had suggested they might transform the al-Mahdi Army into a political party. Al-Mahdi fighters accepted cease-fires in most Shiite areas after suffering huge losses at the hands of the Americans from an uprising in April.
Al-Sadr has made contradictory statements in the past.
In his statement Sunday, the young cleric said, "There is no truce with the occupier and those who cooperate with it."
Earlier Sunday, Allawi told ABC News that he had met with al-Sadr representatives "who want to try and mediate."
"The position of the government is very clear," Allawi said. "There is no room for any militias to operate inside Iraq. Anything outside law and order is not tolerated, cannot be tolerated. The rule of law should prevail."
Although Iraq regained sovereignty, about 160,000 foreign troops, most of them Americans, remain under a U.N. resolution to help the new government restore security.