Kurdish leaders and a British Broadcasting Corporation reporter on the scene say U.S. warplanes bombed a convoy carrying Kurdish fighters and U.S. Special Forces troops.
One Kurdish leader says 17 Kurdish fighters and a BBC translator were killed, and 45 others were wounded, including the brother of the leader of the Kurdistan Democratic Party.
Central Command says early reports indicate one person was killed and six injured, including an American soldier.
The Kurds say the incident won't undermine their resolve to work with the Americans to get rid of Saddam Hussein.
U.S. Special Forces have been calling in air strikes to help Kurdish fighters who are battling Iraqi forces in Baghdad controlled areas of the autonomous region.