At least 28 people were killed and 45 wounded, including two Britons, when a powerful car bomb struck central Baghdad late Wednesday.
US Lieutenant Colonel Peter Jones told reporters at the scene that 27 people were killed and 45 wounded, but minutes later an AFP correspondent saw another corpse pulled from the rubble.
"It was a car bomb. We have not found any remains in the car," Jones said.
The lieutenant colonel also said two Britons were among the wounded.
Major David Gercken of the US 1st Armoured Division told AFP that bulldozers and cranes had been brought to the site in the hope of finding more survivors under the mountains of twisted metal, brick and cement.
"We've just sent a bunch of engineering equipment hoping to take out bodies and in the hopes that if anybody is alive we can get to them."
Jones said some US civilians were among the wounded in the blast at the small Mount Lebanon Hotel. He said he had no reports of any Westerners killed.
Reuters correspondent Luke Baker said bodies were being pulled out of the rubble of the hotel, used mainly by Iraqis and Arabs.
The badly damaged hotel, neighbouring buildings and several cars were ablaze, and rescuers said many people were trapped under the rubble.
"I heard the explosion and I ran down the street, and saw many, many people killed. There were children dead," said Raad Abdul Karim, 30.
Karim said the neighbourhood was populated by Shias, Sunnis and Kurds. "They are ordinary families," he said as ambulances and police cars raced to the scene and crowds of frantic Iraqis rushed to look for friends and relatives.
The blast, which occurred three days before the first anniversary of the start of US-led war to oust Saddam Hussein, carved out a huge crater around seven metres (20 ft) across and three metres (10 ft) deep in the road outside the hotel.
Asked about reports angry Iraqis at the scene had attacked US soldiers, a US military spokesman told Britain's Sky News television: "We do have a quick reaction force on sight. They are assisting Iraqi police."
The explosion occurred near Firdows Square, where a statue of Saddam was symbolically toppled on April 9 last year when US troops rolled into the city.
It was also close to the Sheraton and Palestine hotels, where many foreign contractors, companies and media organisations are based.
Guerrillas fighting the US-led occupation of Iraq have mounted a number of car bomb and other attacks in Baghdad in recent months, and hotels have been targeted several times.
Washington, which blames the attacks on supporters of Saddam as well as foreign Islamic militants, vowed the blast would not sway US determination to bring democracy to Iraq.
"We will meet this test with strength and resolve. Democracy is taking root in Iraq and there is no turning back," said White House spokesman Scott McClellan.
"We will continue to stay to finish the job for the Iraqi people," McClellan said.
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