An investigation is under way into the conflicting stories of why U.S. soldiers fired shots into a vehicle carrying four Canadian diplomats in Baghdad.

The Americans say the Canadian vehicle ignored hand signals to stop near a U.S. military convoy, leading to a soldier firing a burst of shots into the vehicle's engine block in the Tuesday incident.

"Our soldiers and our security personnel certainly don't want to fire on innocent people. Certainly not close friends," said Sean McCormack, a U.S. State Dept. spokesman, in Washington on Wednesday.

But one Canadian official who was in the car says they were paying close attention to the convoy ahead of it. They did not try to pass the convoy and saw no warning signs from U.S. soldiers.

None of the four passengers or the driver -- including the chargé d'affaires in Iraq Stewart Henderson -- suffered injuries, despite reports of a bullet missing one of them by just two centimetres.

The incident occurred in the Green Zone, the heavily-fortified part of Baghdad that houses coalition and Iraqi government offices.

"The American government is looking into exactly what happened yesterday so we make sure this kind of event does not happen again," outgoing Foreign Affairs Minister Pierre Pettigrew said Wednesday in Ottawa.

While the U.S. government described the incident as "regrettable," U.S. Defense Secretary Donald Rumsfeld got testy when questioned about the incident at a Washington news conference.

"I wasn't there. I obviously don't know. It's being investigated."

A spokesman for the U.S. forces in Iraq said warning shots were fired at the Canadian envoy's car when it apparently tried to pass an American military convoy.

Lt. Col. Barry Johnson said the U.S. troops were driving within the Green Zone when they signalled for a convoy of cars approaching them to stop.

"But the convoy continued to approach and failed to stop, and the soldiers fired warning rounds at the front of the vehicles, resulting in no injuries," Johnson said.

"After checking, it was found that the vehicles belonged to the Canadian Embassy."

But there was, from Johnson, a slight admission that a mistake had been made.

"It's certainly under review, to see what procedures, what steps were taken and who made a mistake, to make sure this wouldn't happen again," Johnson said.

If vehicles fail to respond to hand signals followed by warning shots, "shots may be fired at the vehicle," he added.

He also noted that military convoys carry markings warning that the common procedure is not to pass, a precaution against suicide bombers.

Two stories from the Green Zone

Canadian consular official Michelle Cameron, who was travelling in the vehicle at the time of the incident, told a different story.

Cameron told CTV News the Canadian convoy was keeping a good distance and that no one in her vehicle observed hand signals from the Americans that might have indicated they were driving too close to the Americans.

"All of a sudden we heard what we initially thought an explosion which turned out to be a burst of gunfire. We took two bullets to the hood of the car. One came through the windshield to the passenger compartment," she said.

"How many warning shots go across a vehicle into the passenger compartment?" Cameron told CTV News, adding Americans at the scene apologized immediately.

Prime minister-designate Stephen Harper said he accepted the Canadian version of events.

CTV's Tom Clark, reporting from Washington, said the most likely scenario is this:

• The Canadian car, sporting a hand-drawn flag in its window, was trailing the U.S. convoy of Humvees at a safe distance;
• As the convoy approached Camp Honour, it pulled over to the left onto the shoulder and came to a halt in front of the checkpoint;
• The rear Humvee, according to the Americans, gave hand signs for the Canadian car to stop;
• Perhaps not seeing the signal, the car continued into the convoy's safe zone; then,
• A soldier then fired three warning shots into the car.

Clark said the Canadians were travelling from the British residence to the Canadian residence -- "a trip they have made hundreds of times before."

"They were all trained on how to drive in the Green Zone," he told CTV Newsnet Wednesday.

But he noted the Canadian foreign affairs ministry has been virtually silent on what happened or their diplomats' version.

With a report from CTV's Tom Clark