Militants attacked the town of Muqdadiyah northeast of Baghdad on Friday, sparking clashes that killed 30 Shiite militiamen, a police colonel and a doctor said.
The fighting began on Friday morning and eased later in the day with security forces still in control of Muqdadiyah, a key approach to Diyala provincial capital Baquba, and militants deployed in adjoining areas.
Shiite militiamen have joined Iraqi security forces in fighting against a major offensive by Sunni Arab militants that overran all of one province and chunks of three more in a matter of days.
Security forces performed poorly during the initial days of the assault, in some cases shedding uniforms and abandoning vehicles in their haste to flee.
While they seem to have recovered somewhat from the shock of the onslaught, retaking ground in certain areas, the militants have made gains elsewhere.