The controversy raised questions over whether US troops are over-zealous in efforts to crack down on insurgents, who killed at least 23 people in fresh attacks yesterday.
The Bulgarian soldier was killed in southern Iraq on Friday, around the same time US forces in Baghdad opened fire on a vehicle taking kidnapped Italian journalist Giuliana Sgrena to the airport shortly after her captors freed her.
Ms Sgrena was wounded in the shoulder and secret agent Nicola Calipari, who played a key role in her release, was killed.
Italy laid on an emotional state funeral in Rome yesterday for Mr Calipari, who died attempting to shield Ms Sgrena. He has been hailed as a hero at home.
Among the mourners were Prime Minister Silvio Berlusconi, who is trying to reconcile his pro-US policies with demands for the truth from Washington over the shooting.
Hundreds of Italians lined the streets of Rome as Mr Calipari's body was driven to the basilica of St Mary of the Angels and Martyrs for the funeral, shown live on television.
Soldiers provided a guard of honour and crowds applauded as the coffin, draped in the Italian flag, was carried to the church.
"It is time to honour the heroic sacrifice of Nicola Calipari, without divisions, all together, without controversy. Let's leave the controversy outside," top Government official Gianni Letta said in an address.
Bulgarian Defence Minister Nikolai Svinarov said an inquiry into the death of the Bulgarian soldier showed he was probably accidentally killed by US troops.
"Someone started shooting at our patrol from the west, and in the same direction, 150 metres away, there was a unit from the US army," he said.
"The result gives us enough grounds to believe the death of rifleman Gurdi Gurdev was caused by friendly fire."
The US military had no immediate comment.
Many Iraqis say US forces are quick to open fire and often kill innocent civilians. The US military says it does all it can to minimise the risk of innocent Iraqis being killed.
It said the Italian vehicle was travelling at high speed and ignored repeated instructions to stop.
But Ms Sgrena, who works for the Rome-based communist newspaper Il Manifesto, has disputed that account, as have Italian politicians. Some say the car was deliberately shot at.
A spokesman for the White House yesterday rejected the accusation.
"It's absurd to make any such suggestion that our men and women in uniform deliberately targeted innocent civilians. That's just absurd," said Scott McClellan.
The Italian Government has made clear it will continue to support President George W Bush despite the killing and will not withdraw its troops from Iraq.
Although the Governments of Italy and Bulgaria supported the war in Iraq, a large proportion of their people opposed it.
Some 75% of Bulgarians disagree with US-led military operations in Iraq, according to opinion polls.
In Balad, north of Baghdad, a suicide bomber blew up his car outside an army officer's house, killing at least 12 people, hospital officials and police said.
In the nearby town of Baquba, insurgents attacked soldiers and police with a suicide bomb, mortars and land mines, killing at least 10 people.
Al-qaida's wing in Iraq, led by Jordanian militant Abu Musab al-Zarqawi, claimed responsibility.
In Baghdad, gunmen shot dead a policeman.
In the northern city of Mosul, an Iraqi woman, who had been a candidate in the January elections for the Shi'ite alliance that topped the poll, was shot dead outside her home on Sunday, officials said.
Hana Muhamasji, a university professor, was one of the few Sunni candidates on the alliance list.
Iraq's government issued new photographs on Monday of Zarqawi, showing him with short hair and a cropped beard. They are among only a handful of images of the militant.
The US has offered $25 million for information leading to his capture or death. The Iraqi government says his network is crumbling and that his capture is close.
But Zarqawi's group said in an internet statement yesterday he was safe and in good health, and leading fresh attacks on US and Iraqi forces.