In an Internet statement Al-Qaeda in Iraq said the militant was only “one of the soldiers of Al-Qaeda and the commander of one of its units operating in Baghdad.”
It dismissed the claim as a “farce” designed to raise US morale.
Iraqi national security adviser Muwaffaq Rubaei said a militant called Abu Azzam whom he described as the number two of Al-Qaeda in Iraq had been killed.
Abu Azzam, also known as Abdallah Nahim but whose real name was Abdallah Mohammed al-Juhaari, was “the second-most wanted Al-Qaeda person in Iraq”, according to the US military.
He was supposedly shot early on Sunday during a joint US-Iraqi raid on a flat in a high-rise in Baghdad following a tip-off, US military spokeswoman Lieutenant Michelle Lunato said.
Azzam was located thanks to “multiple intelligence sources and information from a close associate,” Lt Lunato added.
“During the operation, which was held with the intent of capturing him, he fired and he was killed by return fire,” she said, adding that one other insurgent was wounded in the raid.
Mr Rubaie described his killing as “a major coup” for the security forces.
He “must have killed 1,200 Baghdadis”, mostly in car bombings since he took charge of operations in Iraq in April, said Mr Rubaie.
But Al-Qaeda in Iraq said it could not even confirm that Abu Azzam had been killed in the raid.
US and Iraqi forces have claimed repeated successes in the past in their fight against Al-Qaeda in Iraq, an organisation loyal to Saudi-born extremist Osama bin Laden, held responsible for some of the country’s deadliest attacks.
“We continue to decimate the leadership of the Al-Qaeda in Iraq terrorist network and continue to disrupt their operations,” US Major General Rick Lynch, the chief military spokesman, said in a statement.
But US-led forces have failed to stem the level of violence in the country.
The leader of al-Qaeda in Iraq, Abu Musab al-Zarqawi, a Sunni extremist, has launched a new wave of terrorism bombings after declaring “all-out war” on the country’s majority Shiites.
In the latest attack against security forces Tuesday, 10 people were killed by a suicide bomber wearing an explosives belt who blew himself up in a crowd waiting outside a police recruitment centre in Baquba, northeast of the capital.
Many of the victims were new recruits reporting for their first day at work, police said.
A car bomb also exploded in a central Baghdad street as a private convoy passed by. Police said five civilians were hurt.
Gunmen attacked a bus taking detainees to Abu Ghraib jail in western Baghdad, killing two detainees and wounding eight.
Four police guards were also hurt.
Another policeman was killed by gunmen in the same area.
In eastern Iraq, close to the Iranian border, police discovered the bodies of 22 men, shot dead and partially eaten by dogs, in open countryside near Jasan, some 70 kilometres east of Baghdad.
The men, who could not immediately be identified, had been blindfolded and had their hands bound.
They were believed to have been shot up to a week ago.