Iraqi security forces arrested dozens of people, including the son of a leading Sunni Arab politician, in a pre-dawn raid on Friday after a car rigged with explosives was found near the lawmaker's office.
The incident threatened to increase political tension across Iraq's sectarian divide at a time when violence has been falling dramatically in the country.
The Shi'ite-led government said Adnan al-Dulaimi, leader of the Accordance Front, the main Sunni Arab bloc, could be stripped of the immunity from prosecution he holds as a member of parliament if he was found to have links to car bombs.
No one is above the law. Dr Adnan al-Dulaimi has immunity, but this does not exempt him from questioning and accountability, government spokesman Ali al-Dabbagh said.
The case is very serious and the accusations against him are very serious. He has to prove his innocence. He will be called for questioning. If the charges against him are proven, his immunity will definitely be lifted.
Seven people were arrested on Thursday at Dulaimi's office and 29, including Dulaimi's son Mekki, were seized in a raid early on Friday at Dulaimi's house, said Brigadier General Qassim Moussawi, security spokesman for Baghdad.
We have also found quantities of weapons and uniforms of the army and police at the home of Dr. al-Dulaimi, he told Reuters. Dulaimi's bodyguards are suspected of having links to car bombs and killings. There are confessions against them.
Dulaimi rejected the accusations.
This is all not true. These are false accusations, Dulaimi told Reuters. We are the ones who are subject to terrorism.
The wreckage of a four-wheel drive vehicle could be seen on the road outside a charity run by Dulaimi next door to his main offices in Baghdad, where security forces detonated it after discovering it was rigged with explosives on Thursday.
Windows had been blown out of the charity building, which was covered with black smoke, and its main gate destroyed.
Some Iraqi officials have said a second car was also detonated in the area, but Iraqi Army Lieutenant Hussam Abdullah, at the scene, said there was only one.
Moussawi said the car bomb was found when security forces chased a suspected fugitive involved in a shooting into Dulaimi's compound. Dulaimi's party denied any link to bombs.
Dr. Adnan al-Dulaimi has been subject to ferocious attacks to distort his reputation, his party said in a statement.
The party said 53 people had been detained.
Two Iraqi armoured vehicles were parked outside Dulaimi's office compound. U.S. Lieutenant Brent Slough said American forces in the area were working with Iraqi troops to keep order.
Iraq has seen a sharp reduction in violence over the past few months, but politicians remain divided on sectarian lines. Iraqi authorities have accused members of Dulaimi's entourage of links with militants in the past.
Dulaimi's bloc quit Prime Minister Nuri al-Maliki's government in August and has so far rejected efforts to lure it back, saying it wants a greater say in security policy.
Dabbagh also said on Friday that Maliki had written to U.S. President George W. Bush asking him to order the handover of three former officials, including Saddam Hussein's cousin Ali Hassan al-Majeed, known as Chemical Ali, for execution.
Maliki's government says it has the authority to execute the officials, who were convicted of genocide for their roles in a campaign against Kurds in 1988.
But President Jalal Talabani, a Kurd, and Vice President Tareq al-Hashemi, a Sunni Arab, have said they must approve any such decision. Hashemi has threatened to resign if the execution goes ahead without a presidential decree.
The U.S. military has said it will hand over the men only when it receives an authoritative government of Iraq request.
(Writing by Peter Graff, editing by Tim Pearce)