In a notably gloomy report to Congress, the Pentagon said illegal militias have become more entrenched, especially in Baghdad neighborhoods where they are seen as providers of security as well as basic social services.

The report described a rising tide of sectarian violence, fed in part by interference from neighboring Iran and Syria and driven by a "vocal minority" of religious extremists who oppose the idea of a democratic Iraq.

Death squads targeting mainly Iraqi civilians are a growing problem, heightening the risk of civil war, it said.

"Death squads and terrorists are locked in mutually reinforcing cycles of sectarian strife," the report said. It added that the Sunni-led insurgency "remains potent and viable" even as it is overshadowed by the sect-on-sect killing.

"Conditions that could lead to civil war exist in Iraq, specifically in and around Baghdad, and concern about civil war within the Iraqi civilian population has increased in recent months," the report said. It is the latest in a series of quarterly reports required by Congress to assess economic, political and security progress in Iraq.

Growing numbers of Congress members are recommending either a shift in the Bush administration's Iraq strategy or a timetable for beginning a substantial withdrawal of American forces. Although administration officials say progress is being made in Iraq, U.S. commanders have increased U.S. troop levels by about 13,000 over the past five weeks, to 140,000, mainly due to increased violence in the Baghdad area.

Col. Thomas Vail, commander of a 101st Airborne brigade operating in the mostly Shiite areas of eastern Baghdad, told reporters at the Defense Department's Pentagon headquarters on Friday that an intensified effort to root out insurgents and quell sectarian violence in the capital is bearing fruit, leading to a decrease in sectarian murders in recent days.

"They understand a big stick," he said, referring to a bigger U.S. and Iraqi force confronting militias and others responsible for violence such as the barrage of coordinated attacks across eastern Baghdad that Iraqi police said killed at least 64 people and wounded more than 286 within half an hour Thursday.

Peter Rodman, assistant secretary of defense for international security affairs, told reporters that although there has been progress this summer toward reviving the Iraqi economy and raising electricity production, the security conditions have deteriorated even as the number of trained Iraqi troops has increased.

The report covered the period since the Iraqi government led by Prime Minister Nouri al-Malaki was seated May 20.

"The last quarter, as you know, has been rough," Rodman said. "The levels of violence are up and the sectarian quality of the violence is particularly acute and disturbing."

That assessment, which has been expressed publicly by U.S. military commanders and others in recent weeks, was tempered by a degree of optimism that the Iraqi government supported by U.S. troops will succeed in quelling the sectarian killing.

Optimism among ordinary Iraqis, however, has declined, the 63-page report said.

When asked whether they believe "things will be better" in the future, the percentage of Iraqis responding positively has dropped fairly consistently during the past year whether they were asked to look ahead six months, one year or five years, according to polling data cited in the report.

The report is the first to Congress since the Iraqi government assembled its full slate of ministers in early June. Since then, sectarian tensions have increased, "manifested in an increasing number of execution-style killings, kidnappings and attacks on civilians" and growing numbers of people forced from their homes, it said.

It said sectarian violence has spread from Baghdad into Diyala and Kirkuk provinces north of the capital. It also cited a rising problem with violence in the predominantly Shiite southern region, especially Iraq's main port city, Basra.

"The security situation is currently at its most complex state since the initiation of Operation Iraqi Freedom," the report said, using the U.S. military's name for the war that was launched in March 2003 to overthrow President Saddam Hussein.

Although it acknowledged the risk of civil war, the report said the current violence does not amount to civil war and asserted that momentum toward a civil war can be stopped.

"Breaking the cycle of violence is the most pressing goal of coalition and Iraqi operations," it said.

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