(Adds Sadr City demonstration, paragraph 14)
BAGHDAD, Nov 24 (Reuters) - Iranian-backed militants were behind a bombing that killed 13 Iraqis at a Baghdad pet market, the U.S. military said on Saturday, raising concerns that Shi'ite militias might be switching tactics.
U.S. military spokesman Rear Admiral Gregory Smith said it appeared the Shi'ite militants wanted Friday's bombing, the deadliest attack in Baghdad in two months after a lull in violence, to look like the work of al Qaeda.
Most big bombings that cause mass casualties are blamed on Sunni Islamist al Qaeda.
Shi'ite militias, many of which the military says are backed by Iran, are more commonly accused of sectarian killings and kidnappings rather than what the U.S. military calls "spectacular", or large-scale, bomb attacks aimed at civilians.
Smith told a news conference that overnight raids by U.S. and Iraqi forces had captured four people who U.S. forces believed were responsible for the "horrific act of indiscriminate violence" at the pet market.
The bomb, placed inside a birdcage, was packed with ball-bearings to maximise casualties.
"Based on subsequent confessions, forensics and other intelligence, the bombing was the work of an Iranian-backed 'special groups' cell operating here in Baghdad," Smith said.
Washington accuses Iran of funding, training and arming Shi'ite militias in Iraq. The military has often displayed weapons, including rockets and roadside bombs, it says have been supplied by the Iranian Revolutionary Guards' elite Qods Force.
Tehran denies the charge and blames the violence in Iraq, in which tens of thousands of people have been killed, on the U.S.-led invasion to topple Saddam Hussein in 2003.
"I'm not saying that yesterday Iran ordered the bombing of the pet market," Smith said. "What I'm telling you is that the forces that are inside Iraq that have historically received training, funding, equipping and so forth by Iran is the group responsible for that attack."
U.S. officials in Iraq had appeared to soften their tone towards Tehran in recent weeks, noting several positive developments in Iran's involvement in Iraq, although the military says Iranian influence is still widespread.
Among those developments, U.S. officials have noted a ceasefire ordered in August by anti-American Shi'ite cleric Moqtada al-Sadr, the head of the Mehdi Army militia which is accused of links to Iran.
"This bombing demonstrates that there are individuals who continue to ignore Moqtada al-Sadr's pledge of a ceasefire," Smith said.
In Sadr City, a sprawling Shi'ite slum and Mehdi Army stronghold in northeast Baghdad, thousands of Iraqis rallied on Saturday to pledge their support to the young cleric Sadr. Many carried banners reading "No, No America ... Yes, Yes Moqtada".
Smith said those behind the market attack intended to make it look like the work of al Qaeda in order to convince Iraqis in the area they needed the protection of Shi'ite militias.
"It was a very twisted intent ... but we accept that to be the motivation," he said.
Violence has fallen across Iraq in recent months, with attacks down by 55 percent since an extra 30,000 U.S. troops became fully deployed in mid-June, and something like normal life has been returning to Baghdad.
Baghdad officials reopened Abu Nawas street on Saturday, a famous thoroughfare along the Tigris River that was closed as residents retreated behind concrete blast walls at the height of the violence.
"We will poke terrorism in the eye," said Lieutenant-General Abboud Qanbar, head of the Baghdad security plan.
In the northern city of Mosul, two suicide bomb attacks against an Iraqi police checkpoint on Friday killed 21 people, Smith said, including 10 civilians. Police had previously said nine people were killed. (Editing by Dean Yates and Elizabeth Piper)
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