In Washington, a Pentagon official said officials suspect a malfunction on the Chinook.
"They think it was a mechanical problem," he said on condition of anonymity because he was not authorized to speak to the press on the record.
Earlier, a military spokesman in Baghdad, Maj. John Hall said hostile fire had been ruled out.
"The other three helicopters in the flight did not have incident or injury," Hall said.
The military said the seven who died were the only people on board. The Chinook, the Army's workhorse, is designed to transport troops and supplies to combat and other regions.
The crash occurred in an area of Iraq under British military control, and a British quick reaction force and road convoy were dispatched to help American officials at the site. An investigation into the cause of the crash was under way.
It was the deadliest helicopter accident for U.S. troops since Aug. 22, 2007, when a UH-60 Black Hawk helicopter crashed in northern Iraq, killing all 14 U.S. soldiers aboard. The last accident that took this many lives was on Sept. 10, 2007, when seven American soldiers were killed in a vehicle accident in western Baghdad.
"It is a tough day for the coalition and we are deeply saddened by the loss of our soldiers," said Col. Bill Buckner, another military spokesman. "Our prayers and condolences go out to the families during this difficult and tragic incident."
The military did not release the names of those killed pending notification of next of kin.
The military also said Thursday that a U.S. soldier died from non-combat related causes on Wednesday. That brings to two the number of non-combat deaths on Wednesday; they occurred in separate incidents, the military said.
Since the 2003 U.S.-led war in Iraq, 4,168 members of the U.S. military have been killed, according to an Associated Press count.
Deadly violence continued in Iraq Thursday. An explosives-laden car parked at a bus station in the southern Iraqi city of Nasiriyah killed two people and wounded one, a police officer said on condition of anonymity because he was not authorized to speak to the press. A U.S. military report on the incident said two Iraqis died when a bomb exploded in their vehicle.
Nasiriyah is about 200 miles southeast of Baghdad.