British military intelligence officials said that Iraqi troops on Tuesday were firing mortars at civilians staging an uprising in the southern Iraqi city of Basra, and coalition forces were firing missiles at the pro-Saddam Hussein forces, the BBC reported.

Two British soldiers were killed by "friendly fire" near Basra, the Ministry of Defence said on Tuesday. Two others were seriously injured.

A statement from the ministry said the two were killed in a accidental exchange of fire between two British Challenger tanks.

The British chief of staff at Central Command battle headquarters said early indications suggest an uprising might have started in Basra.

Asked by reporters if he could confirm British television reports about a possible uprising, Major General Peter Wall said: "There are early indications that just might be started and we will be very keen to capitalize on it."

"We don't know what has spurred them, we don't know the scale of it. We don't know where it will take us," he said.

"We aren't seeing anything, we're just hearing reports that there are people who are appearing on the streets in significant numbers and who are essentially being less compliant with the regime than they are normally."

Iraq's information minister has denied the reports of an uprising in Basra, Iraq's second city and a Shi'ite stronghold.

Earlier, a British military spokesman said he had heard reports of an uprising against Saddam Hussein in Iraq's second city of Basra, adding that he believed British forces circling the city had tried to help the revolt.

"We are carefully assessing the situation at the moment and certainly I'm sure that some action will be forthcoming in the morning," British spokesman Al Lockwood told Sky television.

"Open source reporting has it that there was some form of uprising this afternoon against the Baath party. I do understand that the Shia population attempted to attack the ruling party," he said.

"The ruling party responded by firing mortars at the crowd that was advancing towards them, our artillery responded to that with shells and mortars. In addition I believe from open source that some sort of weapon was used against the Baath party headquarters," Lockwood said.

Earlier, British ITN television journalist Richard Gaisford, citing military intelligence officers, told the Sky news channel that British troops were shelling Saddam's forces to try to help the reported uprising in Basra.