A US Stars and Stripes flag has been removed from the new port town of Umm Qasr just over the Iraqi border from Kuwait.
Umm Qasr was taken after British Royal Marine Commandos troops were called in to break the fierce Iraqi resistance which pinned down American troops for two hours.
No reason was given for the decision, but Washington has consistently stressed that invading forces want to liberate Iraq, not occupy it.
The US aims to use the modern port as an entry point for humanitarian aid into Iraq.
The old port of Umm Qasr is one mile from the new port of Umm Qasr, which has yet to be captured.
British marines are co-ordinating the assault on Umm Qasr.
British military spokesman Colonel Chris Vernon said the city was not yet entirely under the control of the invading force.
As they entered Umm Qasar, the soldiers passed two blazing cars and the bodies of two men in civilian clothes lying on the road.
A third man drenched in blood sat nearby on the ground surrounded by women who flagged down a Marine medical team to come to his aid.