BAGHDAD, Iraq -- The Iraqi government yesterday said it had revoked the license of Blackwater USA, an American security company involved in a shootout in Baghdad that killed at least nine people, raising questions over which nation should regulate tens of thousands of civilian hired guns operating in Iraq.

The Iraqi government's announcement was its most public assertion to date of its right to take action against foreign security companies when a suspected crime has been committed.

Several violent episodes involving Blackwater have infuriated Iraqi officials. An Interior Ministry spokesman, Brig. Gen. Abdul-Karim Khalaf, said the decision meant Blackwater "cannot work in Iraq any longer."

"Blackwater has made many mistakes resulting in other deaths, but this is the last and the biggest mistake. This is unjustified," Gen. Khalaf said. "Security contracts do not allow them to shoot people randomly. They are here to protect personnel, not shoot people without reason."

Martin L. Strong, a Blackwater vice president, said the company's guards had responded appropriately to an ambush, and that the company had received "no official indication" of Iraqi action against Blackwater.

Blackwater, based in North Carolina, has an estimated 1,000 employees in Iraq. The company has a high profile because it guards U.S. Ambassador Ryan C. Crocker and other diplomats in the country. The company's black SUVs and agile, armed "Little Bird" helicopters escort diplomatic convoys throughout Baghdad.

Blackwater obtained a one-year operating license from the Interior Ministry in 2005, according to a scanned copy of the document provided by the company. After The Washington Post reported in June that the company was effectively operating outside of Iraqi law, Blackwater approached the Private Security Company Association of Iraq to request assistance to obtain a license, according to the trade group. "We have a license renewal in process with the Ministry of Interior," Mr. Strong said.

The shooting started at noon Sunday, when a car bomb exploded near a State Department motorcade traveling through the western Mansour neighborhood of Baghdad near Nisoor Square, U.S. officials said. Following the explosion, Blackwater employees guarding the diplomats exchanged fire with armed attackers, Blackwater and U.S. officials said.

The subsequent battle killed at least nine people and wounded 14, Iraqi police and hospital workers said. Gen. Khalaf put the death toll at 11.

"We were shocked when we saw these fighters getting out of their SUVs and shooting randomly at people," said Sgt. Mohammed Juwad Hussein, an Iraqi army soldier who said he was manning a checkpoint in Baghdad near the scene of the fighting. "We didn't know who they were targeting or who they wanted to shoot."

Mr. Strong described the incident as an ambush because after the explosion there was small-arms fire "from close to 360 degrees around the motorcade." Normally, he said, the procedure is to try to get out of the ambush zone, but in this case one of the Blackwater vehicles was disabled by gunfire.

Under such circumstances, Blackwater personnel are authorized to use "aimed fire" directed only at people with weapons. "If there is an extraction of our people, they can return fire to defend themselves," Mr. Strong said. He said no Blackwater employees were wounded, and all escaped.

Blackwater is conducting its own investigation of the event, he said, and would cooperate with the State Department's inquiry. He said that in the past week, one of Blackwater's helicopters had been shot down, and at least two other attacks on convoys had occurred.

U.S. Embassy officials would not speculate on how the Iraqi government's decision might affect their work with Blackwater. Secretary of State Condoleezza Rice called Prime Minister Nouri al-Maliki to apologize about the episode and promised to investigate, Mr. Maliki's office said in a statement. Ms. Rice also expressed her regret over the death of innocent civilians in the incident, State Department spokesman Tom Casey said.

The incident highlighted the murky legal space that private foreign security contractors occupy in Iraq. Some security experts said it is unlikely that the Iraqi government could expel Blackwater because its contract is through the State Department. A regulation known as Order 17, which was established under the U.S.-led Coalition Provisional Authority headed by L. Paul Bremer and is still in effect, granted U.S. private security contractors immunity from prosecution in Iraqi courts.

Pentagon officials have said at least 20,000 private security guards operate in Iraq. The International Contractors Association, a private trade group, recently said the number could be as high as 50,000 and includes guards from dozens of counties, including thousands of Iraqis employed by foreign companies.