It said a service member involved in the incident in the former flashpoint city of Fallujah west of Baghdad was removed from his duties on Thursday.

"US forces initiated an investigation into reports that a coin with a Bible verse written in Arabic was distributed to Iraqi citizens as they passed through a Fallujah entry control point," the military said in a statement.

"A coalition force service member was removed from his duties Thursday amid concerns from Fallujah's citizens regarding reports of inappropriate conduct."

Residents of Fallujah, scene of one of the bloodiest post-invasion battles between insurgents and US forces in Iraq in 2004, said that marines had been doling out the token-like coins to residents to promote Christianity.

The incident occurred less than than two weeks after a US soldier was removed from Iraq for using a Koran for target practice at a firing range near Baghdad and writing graffiti in the Muslim holy book.

The incident sparked outrage from the Iraqi government of President Nuri al-Maliki and prompted an apology from US President George W. Bush. But it triggered protests that left several people dead in Afghanistan.

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