The recent string of American deaths at the hands of Iraqis opposed to the occupation of their country continued Wednesday.

One U.S. soldier was killed and another wounded in a drive-by shooting in south central Baghdad. In the center of the capital, U.S. troops being threatened by a stone-throwing crowd shot and killed two demonstrators.

U.S. troops from the First Armored Division (search) were hit by gunfire at a gas station. The gunmen walked up to a squad of troops guarding the gas station and opened fire at close range before fleeing in a waiting car, witnesses told Capt. David Gercken, a spokesman for the Army's 1st Armored Division (search).

The shooters escaped as other soldiers tried to give aid to the wounded, said U.S. Army Capt. John Morgan.

The two Iraqi deaths took place as former Iraqi soldiers demonstrated to demand back wages outside American headquarters at one of Saddam Hussein's former palaces.

Military officers initially reported two people were wounded, while Iraqis at the scene said two were killed and one wounded. U.S. troops took two fallen Iraqis to an army aid station inside the compound. U.S. Marine Corps Maj. Sean Gibson confirmed the two Iraqis had died.

"One demonstrator pulled out a weapon and began shooting. U.S. forces responded, killing two of the demonstrators," U.S. Central Command said in a statement.

Another military spokesman said the incident began when demonstrators threw stones at a convoy of military police vehicles moving toward the Assassins Gate (search) of the Republican Palace, now the headquarters of the U.S.-led administration.

"A soldier did fire his weapon," in response to the stoning, Morgan said.

Iraqis who participated in the protest said the violence erupted when the crowd pressed against a vehicle moving slowly outside the gate and banged on it. A soldier fired into the air, apparently setting off a panic in the crowd.

Witnesses described a tense scene with about 40 soldiers holding back the crowd with bayonet-mounted rifles behind concertina wire, in temperatures soaring toward 113 degrees.

AP photographer Victor Caivano said the demonstrators threw stones at the soldiers and at reporters, who were forced to retreat.

Raad Mohammed, a low-ranking former army officer who joined the paycheck protest, said his friend was shot in the right shoulder. Mohammed's checkered shirt was stained with what he said was his friend's blood.

Mohammed said he and others were about to put the wounded man in a car when American troops approached and said, "We'll take care of him." He said they took the man inside the compound.

There have been frequent demonstrations outside the Republican Palace, usually over the issue of unpaid wages to civil servants and the army. Wednesday's demonstration coincided with the birthday of Saddam's eldest son, Odai.

The shootings came as the New York-based Human Rights Watch (search) alleged that troops used excessive force in the town of Fallujah when they shot and killed 20 protesters and wounded nearly 90 in two incidents on April 28 and 30.

The watchdog group said Tuesday there was no evidence to support claims by U.S. commanders that their troops returned precision fire on gunmen in the crowd who fired on them. The military is conducting its own investigation.

Meanwhile, U.S. troops ramped up their searches in Baghdad for illegal weapons and supporters of Saddam's regime.

Before dawn Wednesday, troops sealed several streets of the Karrada neighborhood and called residents from their beds to stand in the street as they searched their homes. One man was taken away with his hands bound behind his back.

The military says about 400 people have been arrested since the latest operation, dubbed Desert Scorpion, began on Sunday. The searches have aroused widespread resentment.

While struggling to restore order and crack down on pro-Saddam loyalists, U.S. authorities are also trying to build new, more democratic institutions in Iraq.

They announced a broad revamping of Iraq's courts, suspending the death penalty and planning a new tribunal to speed up the trials of Saddam loyalists.

A new Central Criminal Court announced Tuesday, which could be operational within a month, is part of a program to replace a judicial system that was notoriously corrupt and which catered to Saddam's whims, including the execution of thousands of his political opponents.

The objective "is to clean up Iraq's judiciary," said Paul Bremer (search), the country's top political administrator. Criminals who aim to undermine Iraq's security and reconstruction "will be brought to justice without delay," he added.

Each of Iraq's 700 judges and 150 public prosecutors will be checked for activity in the now-banned Baath party and for reputation of integrity. The new court will have 10 judges chosen by a review committee, comprised of three Iraqis and three judicial experts from coalition countries.

The task of rebuilding the courts also is physical. About 90 percent of the courtrooms in Baghdad were destroyed in the war. Efforts in the last month have brought the courts back to 20 percent capability, said coalition legal officials, in a briefing for reporters.

Recently discovered mass graves in Iraq support the coalition's contention that thousands of people every year were sentenced to death.

Revisions of the Iraqi penal code also accord defendants more legal rights, such as the right to have a lawyer during the investigative stage of his case, and the right to remain silent.

Judges also were told that evidence obtained through torture or undue pressure is inadmissible.

While the new court will handle the most serious cases, it was unclear whether it would try the top leaders of Saddam's regime — or even Saddam himself.

"I would much prefer that we had clear evidence that Saddam was dead or that we capture him alive," Bremer said.

"Sooner or later, if he's alive, we will capture him."

Attacks and accidents have killed about 50 American troops -- including about a dozen from hostile fire -- since major combat was officially declared over on May 1. Between March 20, when the war started, and May 1, 138 Americans died from accidents or hostile fire.

Several other U.S. soldiers have been recently killed, apparently by Iraqi hardliners.

The Associated Press contributed to this report.