Britain's government said "a number of" British military personnel were killed and said the cause was unclear. Police said a rocket hit the helicopter and fire-fighters said they found four charred bodies in the aircraft, which hit a house.
No one on the ground was hurt in the crash, police said. Morgue officials said they knew of four Iraqis killed in the confused hours of violence after youths at the crash site chanted victory slogans for the Mehdi Army.
"I can confirm the tragic deaths of a number of British service personnel," said Defence Secretary Des Browne, appointed only on Friday in a cabinet reshuffle.
As troops in Warrior armoured battle vehicles, some with riot shields, cordoned off the area, youths chanting "Victory to the Mehdi Army" threw rocks and petrol bombs. Soldiers used foam to douse fires ignited on their vehicles.
British military spokesman Squadron Leader Al Green said troops counted about 60 rounds fired in the air from the crowd - not uncommon in Iraq.
In London, a ministry of defence statement said British forces fired three live rounds in defence when they came under attack.
Several people, including children, were wounded when a mortar round later struck a house nearby, witnesses said.
Meanwhile, there were signs of agreement among Iraqi leaders that a unity government could be formed soon. Vice-President Adel Abdul Mehdi said: "I expect the announcement will come in the next few days ... There are no serious complications." Three Iraqi Army officers, including a lieutenant colonel, were killed inside their base by a suicide bomber in Tikrit on Saturday, police said.