"They killed the father of my children! The Americans killed my daughters!" Ikhlas Thulsiqar cried Friday at the Iman Ali Hospital in Sadr City, The New York Times reported Saturday.
She said her family had turned from an alley onto a Sadr City street guarded by U.S. troops when bullets ripped through the car, killing her daughters, 9 and 11, and her 7-year-old son.
The U.S. military said in a statement it was investigating a Sadr City "escalation of force," The Times said.
"That is a serious allegation, and we'll take a look and figure out what happened," Lt. Col. Christopher Garver, a military spokesman in Baghdad, said late Friday.
Coalition forces have been conducting a house-to-house search in the Sadr City section of Baghdad, looking for weapons and militants, The Times said.