The elite Counter-Terrorism Service (CTS) stormed the Tahrir district on the northeastern edge of Mosul.
A loud explosion was heard several streets away from the CTS lines.
An officer said it was a suicide bomber who blew himself up after being surrounded in a house.
The CTS unit was using a drone to try to detect insurgents, Reuters reports.
Militants have been steadily retreating from areas around Mosul into the city since the battle started on Oct. 17.
As the offensive entered its second month, Iraqi government forces are still fighting in a dozen of about 50 neighbourhoods on the eastern part of Mosul, which is divided by the Tigris River that runs through its centre.
Militants are dug in among the civilians as a defence tactic to hamper air strikes, moving around the city through tunnels, driving suicide car bombs into advancing troops and hitting them with sniper and mortar fire.
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