An explosion occurred Saturday outside a former Saddam Hussein (search)-era palace that houses a U.S. consular office and a British base, killing at least one person and wounding two others, police and witnesses said.

A British spokeswoman, Alison Richie, said the target appeared to have been a civilian vehicle and that there were "unconfirmed reports" of American casualties. However, Iraqi police said the three victims were all Iraqis.

In Baghdad, a U.S. Embassy official said U.S. authorities were still tracking down information about the explosion.

Police Capt. Mushtaq Taleb said the bomb targeted a car owned by the National Security Co., a local company, killing the driver and wounding two people of which was in the car and another in the street.

Blast walls near the former palace compound absorbed the brunt of the blast, witnesses said. The charred corpse could be seen in a car outside the building.

The explosion carved a one-foot deep crater. Iraqi police and British troops blocked the street and were investigating the explosion.

Taleb identified the man killed as Iraqi citizen Qasem Khallaf, and the wounded as Yas Khdayer and Israa Kamel.

The explosion occurred just after 4 p.m. at the Basra Palace (search), which is now a British base, a British military spokeswoman said while speaking on condition of anonymity.