A four-year-old Iraqi child cries as older boys stage a mock execution Monday in Baghdad. Children's games are under a heavy influence of ongoing violence in the country, one of the more popular ones being a clash between militias and police.

Baghdad ? The U.S. military accused Iran on Monday of a direct role in a sophisticated militant attack that killed five American troops in Iraq, portraying Tehran as waging a proxy war through Shiite extremists.

The claims about the January attack marked a sharp escalation in U.S. accusations that Iran has been arming and financing Iraqi militants, and for the first time linked the Iranian effort to its ally, Lebanon’s Shiite Hezbollah militia. The allegations could endanger Iraqi efforts to have a new round of talks between the U.S. and Iran.

U.S. military spokesman Brig. Gen. Kevin J. Bergner said the Quds Force, part of Iran’s elite Republican Guards, was seeking to build an Iraqi version of Hezbollah to fight U.S. and Iraqi forces – and had brought in Hezbollah operatives to help train and organize militants.

“Our intelligence reveals that the senior leadership in Iran is aware of this activity,” Bergner told a Baghdad news conference. He said it would be “hard to imagine” that Iran’s supreme leader Ayatollah Ali Khamenei did not know about the activity.

Iran has denied past claims that it was backing Iraqi militants – including accusations that it was providing them with a particularly deadly type of roadside bomb, the explosively formed penetrator. Its ally Hezbollah has denied having any role in Iraq, saying it operates only in Lebanon.

Iranian Foreign Ministry spokesman Mohammad Ali Hosseini rejected the allegations Monday, saying “American leaders have gotten into the habit of issuing ridiculous and false statements without providing evidence, with political and psychological aims.”

But Bergner said an extensive Quds Force program was revealed through interrogations of an alleged Lebanese Hezbollah operative, Ali Mussa Dakdouk, and an Iraqi militant, Qais al-Khazaali, along with documents seized with them. Both men were captured in March in the southern city of Basra.

The Quds Force is providing up to $3 million a month to Iraqi militants and bringing them to three training camps outside Tehran to learn how to carry out bombings, raids and kidnappings, Bergner said. Most of those who trained in Iran were extremists who broke away from Iraqi Shiite militias, including the Mahdi Army loyal to anti-U.S. cleric Muqtada al-Sadr, he said.

Dakdouk, a 24-year veteran of Hezbollah, was sent to Iraq “as a surrogate for the Iranian Quds Force” to finance and arm militant cells known as “special groups,” the general said.

The goal was to organize militants “in ways that mirrored how Hezbollah was organized in Lebanon.” Hezbollah is one of the region’s most disciplined and powerful militant groups, able to fight Israel’s military to a near standstill in a war last summer.

Dakdouk told interrogators that militants behind the Jan. 20 surprise attack in the southern city of Karbala needed support and direction of the Quds Force.