Two different accounts of what happened, one from the Blackwater people, and another from the Iraqi police, that fired on them.
From Wiki:
The Blackwater guards’ account of the incident differed from that set forth in an Iraqi government account. The latter claimed that as the convoy drew close to Nisour Square, a Kia sedan with a woman and her grown son in it was approaching the square from a distance, driving slowly on the wrong side of the road, and that the driver ignored a police officer’s whistle to clear a path for the convoy
According to this account, the security team fired warning shots and then lethal fire at the Kia. Then set off stun grenades to clear the scene. Iraqi police and Iraqi Army soldiers, mistaking the stun grenades for fragmentation grenades, opened fire at the Blackwater men, to which they responded.
In the account by the Blackwater firm, it stated that the driver of the Kia sedan had kept driving toward the convoy, ignoring verbal orders, hand signals, and water bottles which were thrown at the car, and continued to approach even when fired upon.
An Iraqi policeman went over to the car possibly to help the passenger, but the vehicle kept moving and it looked to the guards as if the policeman was pushing it. In their view, this confirmed that they were under attack by a vehicle bomb, whereupon they fired at the car, killing both people in it as well as the Iraqi policeman.
In response to the guards’ killing of the Iraqi policemen, other Iraqi police officers began to fire at the Blackwater men. Since insurgents in Iraq often disguise themselves by wearing police uniforms, the guards could not be sure they were dealing with actual police. They communicated to the State Department operations center that they were under attack. A State Department employee who, walking into the department’s Baghdad operations center on the day of the incident, heard a radio call from the convoy: “Contact, contact, contact! We are taking fire from insurgents and Iraqi police”.
According to Blackwater vice-president Marty Strong, the convoy was hit with “a large explosive device” and “repeated small arms fire” which disabled a vehicle
Several sources have stated that the explosion was caused by a mortar round, though this is not reflected in the Department of State incident report.
Blackwater has denied Iraqi allegations that one of their helicopters fired from the air during the incident.
A State Department report stated that eight to ten attackers opened fire “from multiple nearby locations, with some aggressors dressed in civilian apparel and others in Iraqi police uniforms”.
The report said that as the convoy tried to leave, its route was blocked by insurgents armed with machine guns at 12:08 pm. According to another US government report, “The team returned fire to several identified targets” before leaving the area and a second convoy en route to help was “blocked/surrounded by several Iraqi police and Iraqi national guard vehicles and armed personnel.”
A US Army convoy, possibly the same one delayed by Iraqi forces, arrived approximately a half hour later, backed by air cover, to escort the convoy back to the Green Zone.
On September 27, 2007, the New York Times reported that during the chaotic incident at Nisour Square, one member of the Blackwater security team continued to fire on civilians, despite urgent cease-fire calls from colleagues. It is unclear whether the team-member mistook the civilians for insurgents. The incident was resolved only after another Blackwater contractor pointed his weapon at the man still firing and ordered him to stop.
Potentially some sort of censure or charge is appropriate for the single man who kept firing on civilians, but that's it.
But why is the US Government prosecuting? Let Iraq prosecute.
Let’s be logical. Why would any civilian stand around while the bullets are flying and a convoy is blocked and surrounded after being at war? Are they rubber necking like Virginians on 95?