Two Humvees chased after the assailants, but the third was attacked before it could move, he told AP. Seven masked gunmen, including one carrying what appeared to be a heavy machine gun, killed the driver of the third vehicle, then took the other two soldiers captive, Falah said.

Falah said tensions were high in the area as US troops raided some houses and detained men in looking for the missing soldiers. He said the Americans were setting up checkpoints on all roads leading into the area of the attack and helicopters were hovering at low altitudes.

A Youssifiyah resident, who said his house was searched by U.S. soldiers Sunday afternoon, said the Americans were using translators to offer $100,000 for information leading to those who took the soldiers.

The U.S. military denied a reward had been offered. It said only that coalition and Iraqi forces were continuing the search and "will continue to use every resource available."

The man in Youssifiyah said he would not cooperate.

"I will not do it even if they pay one million dollars," he said, speaking on condition of anonymity because he feared retribution. "They deserve all that they are facing ... we are living a hard life because of them."

White House spokesman Tony Snow said he could not confirm the two missing soldiers were abducted, but he told "Fox News Sunday" that anybody who might be holding them should "give them back."

"Obviously, there is a vigorous effort to try to locate them and to bring them back safely," he said in an interview with CNN.

Iraqi Foreign Minister Hoshyar Zebari said the soldiers appeared to have been taken prisoner. "Hopefully they will be found and released as soon as possible," he said on CNN's "Late Edition."

The US military said Saturday that soldiers at a nearby checkpoint heard small-arms fire and explosions during the attack at 7:15 p.m. Friday, and a quick-reaction force reached the scene within 15 minutes. The force found one soldier dead but no signs of the other two.

Maj. Gen. William Caldwell, spokesman for US forces in Iraq, said blocking positions were established throughout the area within an hour of the attack to keep suspects from fleeing. He also said divers would search a Euphrates River canal near the attacked outpost.

The two soldiers were the first to go missing in the Iraq war since Sgt. Keith M. Maupin of Batavia, Ohio, was captured on April 9, 2004, when insurgents ambushed his fuel convoy west of Baghdad.

A week later, Al-Jazeera television aired a videotape showing the 20-year-old Maupin sitting on the floor surrounded by five masked men holding automatic rifles.

That June, Al-Jazeera aired another tape purporting to show a US soldier being shot. But the dark, grainy tape showed only the back of the victim's head and did not show the actual shooting. The Army ruled it was inconclusive whether the soldier was Maupin.

Elsewhere in Iraq, US and Iraqi troops met little resistance as they established new outposts in southern Ramadi in an operation aimed at denying supplies to insurgents in Iraq's biggest Sunni Arab city.

US commanders said the move wasn't the precursor to a rumored assault to drive out insurgents along the lines of the 2004 attack in Fallujah, but rather an "isolation" tactic.