Construction of the wall began April 10 but was first reported by the Stars and Stripes newspaper on Thursday, The report quoted military commanders as saying the wall is meant to protect a Sunni Muslim area almost surrounded by Shiite neighborhoods.
However, a Los Angeles Times correspondent reported finding no support for it from either Sunnis or Shiites.
"Are they trying to divide us into different sectarian cantons?" said Sunni drugstore owner Abu Ahmed. "This will deepen the sectarian strife and only serve to abort efforts aimed at reconciliation."
Abu Marwan, a Shiite pharmacist, told the Times he saw an unfortunate scenario emerging.
"I feel this is the beginning of a pattern of what the whole of Iraq is going to look like, divided by sectarian and racial criteria," Marwan said.