It's touted as the safest place in Baghdad, but even the thousands of normal Iraqis whose homes wound up in the U.S.-occupied Green Zone (search) want the Americans to move out and the fortress dismantled.

"We want and demand that the Americans evacuate the Green Zone because it contains Iraqi state and private properties," Baghdad Gov. Ali al-Haidari (search) told The Associated Press. "We believe that Iraqi authorities should regain control of this area."

While President Bush insists that sovereignty was returned to Iraq three months ago, 10-square-kilometers in the heart of the Iraqi capital along the banks of the Tigris river — the site of several Saddam Hussein-era palace complexes and some of the city's finest real estate — remains U.S. territory.

The American Embassy, military command centers, preferred embassies and U.S. contracting firms occupy some of the most prominent buildings, while dozens of trailer parks shielded by sandbags to guard against mortar shells and rockets are dotted around palace grounds.

"It's a world within a world," said a Western diplomat who has only left the Green Zone twice in three months. "I imagine there are some people here who never meet Iraqis."

While car bombings, kidnappings and gunfights rage across the capital, life behind the blast walls resembles suburban America: women in shorts jog along tree-lined avenues, off-duty soldiers lounge by the pool and the Green Zone Cafe (search) and two Chinese restaurants are packed in the evenings. Everything from pornographic movies to mobile phone accessories are on sale at the local bazaar.

It's not entirely safe, however. U.S. authorities raised a security alert in the Green Zone after an improvised bomb was found in front of a restaurant there on Tuesday. A U.S. military ordnance detachment safely disarmed the device, U.S. officials said.

A mortar shell exploded in the Green Zone on Thursday. There was no report of damage or casualties.

One problem is that officials have run out of space. Dozens of white wooden shacks in Saddam's former marble-floored reception halls have been erected to provide office space to the various government branches.

But security officials fear the violence outside is threatening to intrude.

"There is a realistic threat of kidnapping there," said a Western security official familiar with the Green Zone. "Because it's so huge, it's very, very difficult to secure the perimeter." The Green Zone also suffers an average of three mortar attacks a day.

Foreign residents have been instructed never to walk out alone or at night, to keep movement down to a minimum and always carry a weapon if you own one, the official said on condition of anonymity.

Nobody yet has been abducted from the Green Zone. But a U.S. serviceman out for a run in April was deliberately knocked down by a truck and assailants tried to bundle him into the back of the vehicle, security officials said. A group of nearby Iraqi workers intervened and the attackers fled.

In September, a U.S. government employee was beaten in the parking lot of the U.S. Embassy by two men who muttered something in Arabic before running away, according to a document circled among security officials in Baghdad.

The American planners who drew the Green Zone perimeter had to include hundreds of middle class homes because they were located near important government buildings that couldn't be left out.

"There are young men crawling all over perimeter and nobody knows whose side they are really on," the security official said.

The distrust is mutual.

"There aren't any kind of friendships between Iraqis living in the Green Zone and the Americans," said an Iraqi housewife who lives in a compound of 50 buildings that was absorbed into the zone and would only give her name as Umm Omar. "Our only contact with the Americans is at the checkpoint when we enter and leave."

She said it takes 10 minutes to leave the Green Zone but can take up to three hours to get back in, as residents must undergo five sets of security checks, two manned by Iraqis and three by American soldiers.

"There is also the danger of car bombs while the cars are parked in line to be inspected," she said.

Another problem is that anybody living in the Green Zone is viewed with suspicion by militants waging a 17-month insurgency to topple the U.S.-backed interim Iraqi authorities and oust coalition forces.

"Some people accuse us of being collaborators with the Americans," Umm Omar said. She said she would not hesitate to move out if rent wasn't so high elsewhere.

American diplomats insist the United States still intends to hand the area back to Iraqi authorities, but concede that it's impossible until the security situation in Baghdad dramatically improves.

Although some officials like the Baghdad governor — perhaps fearful of being seen as American lackeys — want it to happen immediately, others take a more realistic view.

"Theoretically, we are supposed to take over from the Americans in the Green Zone, but we have other priorities to worry about," said Sabah Khadim, press secretary for Interior Minister Falah Hassan al-Naqib.

"This area needs heavy protection and this is difficult for us because we do not have extra forces to take care of it," he said.

Baghdad residents on the street say interim Prime Minister Ayad Allawi can never claim to be fully in charge until the symbol of American military and political power is gone.

"Iraqi sovereignty is incomplete," said Imad Sabir, a 42-year-old shopkeeper. "American troops have to leave."

He wants to see the Green Zone turned into a series of museums, parks and municipal swimming pools.

"People are going through a hard time," Sabir said. "The government should rearrange those places so that people can enjoy themselves and have a picnic."