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"Individuals of very high interest to the coalition forces were hiding out in the building," Lieutenant-Colonel William Bishop of the 101st Airborne Division told Reuters in Mosul.

"This morning we went to the building and surrounded it."

Division spokesperson Major Trey Cate told reporters four "high-value targets" were found dead when the building was stormed after a pitched four-hour battle.

A fifth Iraqi also died in the fighting and at least five were hurt.

They declined to identify the dead or comment on local rumors Saddam's sons might have been present.

But one official, speaking to Reuters on condition of anonymity said, "There is a pretty decent chance" that Saddam's sons Uday and Qusay were there during the shoot-out.

Their death or capture could provide a big boost to U.S.-led forces operating in Iraq. Only Saddam Hussein is ranked higher on the U.S. list of "most-wanted" officials from the former Iraqi regime.

The U.S. has offered a $25 million bounty for the Hussein, and $15 million for each of his sons.

"If in fact one or both sons were taken alive, that could be a tremendous source of information not only on the possible whereabouts of their father, but also possibly on the whereabouts of where these chemical and biological weapons may be stashed," CTV's Alan Fryer said from Washington.