US troops used white phosphorus as a weapon in last year's offensive in the Iraqi city of Falluja, the US has said.
"It was used as an incendiary weapon against enemy combatants," spokesman Lt Col Barry Venable told the BBC - though not against civilians, he said.
The US had earlier said the substance - which can cause burning of the flesh - had been used only for illumination.
BBC defence correspondent Paul Wood says having to retract its denial is a public relations disaster for the US.
Col Venable denied that white phosphorous constituted a banned chemical weapon.
Dahr Jamail, in a story for The Independent quoted civilian witnesses:
"They used these weird bombs that put up smoke like a mushroom cloud," he said. He had seen "pieces of these bombs explode into large fires that continued to burn on the skin even after people dumped water on the burns".
As an unembedded journalist, I spent hours talking to residents forced out of the city. A doctor from Fallujah working in Saqlawiyah, on the outskirts of Fallujah, described treating victims during the siege "who had their skin melted".
You can read more at The Independent: The fog of war: white phosphorus, Fallujah and some burning questions.