Iraqi troops freed a kidnapped British journalist for CBS News on Monday after finding him hooded and bound in a house during a raid in a Shiite militia stronghold in Basra.

Richard Butler's rescue after two months in captivity was a welcome success story for the Iraqi military, which has been strongly criticized for its effort to impose order on Iraq's second-largest city, an oil hub 340 miles southeast of Baghdad.

It came on a day in which at least 37 people were killed or found dead nationwide — half of them in bombings near or in the northwestern city of Mosul.

Roadside bombings killed two U.S. soldiers, one in Baghdad and the other in the northern Salahuddin province, the military said. At least 4,034 members of the American military have died since the war started in March 2003.

Butler was thin but in good condition and laughing as he was shown on Iraqi state television hugging well-wishers and greeting beaming Iraqi officials.

"Thank you and I'm looking forward to seeing my family and my friends at CBS and thank you again," Butler said.

"I'm pretty weak and I've lost quite a bit of weight," he said later. "I'm looking forward to a decent meal."

Defense Ministry spokesman Mohammed al-Askari said the troops were not in fact looking for Butler. He said an army patrol conducting a sweep of the area responded after coming under fire from the house where he was being held in the Jibiliya neighborhood.

One of the gunmen was wounded in an exchange of fire and another was captured while two men escaped, he said.

When asked by al-Askari on Iraqi television if the Iraqi army was good, Butler said it was "brilliant."

"The Iraqi army stormed the house and overcame my guards and they burst through the door," Butler said. "I had my hood on, which I had to have on all the time, and they shouted something at me and I pulled my hood off."

Basra security commander Lt. Gen. Mohan al-Fireji said Butler was sitting on the floor with his head covered by a sack and his hands tied when the troops stumbled upon him.

Butler had been held since Feb. 10, when masked gunmen seized him and his Iraqi interpreter from Basra's Sultan Palace Hotel.

The interpreter was released within days, but Butler remained in captivity despite claims by radical Shiite cleric Muqtada al-Sadr's office that it was negotiating with the kidnappers for his release.

Harith al-Edhari, a director of al-Sadr's office in Basra, said the kidnappers had rejected their efforts and threatened him over the issue. "The kidnappers have nothing to do with the Sadrist movement," he said.

In London, British Foreign Secretary David Miliband thanked the Iraqi security forces "for the professionalism of the task they have undertaken" and said Butler was in the care of the British consulate in Basra.

CBS News spokeswoman Sandy Genelius said the network was "incredibly grateful that our colleague ... has been released and is safe."

The gratitude was eagerly accepted by the Iraqi government, which has been embarrassed by the failure of a major offensive that began on March 25 to dislodge militia groups from Basra.

Iraqi security forces were surprised by the ferocious resistance mounted by the outnumbered militiamen, despite artillery and air support provided by U.S. and British forces.

More than 1,000 security troops — including a full infantry battalion — refused to fight or joined the militias, handing them weapons and vehicles. Those troops were later dismissed from their jobs, along with about 300 police officers in the southern city of Kut.

That decision drew an angry response from al-Sadr, who demanded Monday that the security forces be reinstated.

"All the brothers in the army and police who gave up their arms to their brothers (Sadrists) were only obeying their grand religious leaders, and they were driven by their religious duties," the anti-U.S. cleric said.

The fighting, which quickly spread to other cities in the southern Shiite heartland and Baghdad, ebbed after al-Sadr ordered a cease-fire — though sporadic violence continues.

A large section of a market area in eastern Baghdad was set ablaze Monday when a bomb exploded next to a convoy of U.S. military vehicles. No casualties were reported in the 2 a.m. blast.

Another roadside bomb hit a minibus in downtown Baghdad, killing five passengers and wounding nine, police said.

In northern Iraq, meanwhile, a parked car bomb exploded near an Iraqi army convoy west of Mosul, killing 12 Kurdish soldiers and wounding five, police chief Col. Mutlaq al-Shimmari said.

In Tal Afar, south of Mosul, a suicide bomber attacked a funeral for a Shiite family, killing five people and wounding 22, Mayor Najim Abdullah said.

U.S. soldiers unearthed a mass grave Sunday containing as many as 30 badly decomposed bodies near Muqdadiyah, about 60 miles north of Baghdad.