Some of the detainees are also linked to militia groups, a British commander in the area said. Sources inthe rebel Shia cleric Muqtada al-Sadr's office in the southern Iraqi city said those detained were mostly supporters of Mr Sadr.
"In the past two months, eight multi-national force soldiers and six coalition members have been killed by terrorists in Basra province," Brigadier John Lorimer said in a statement.
"This terrorism must be stopped and ... this operation was designed to do exactly that," he said.
The raids came hours after Tony Blair said that London suspected either Iran or Lebanon's Hizbollah group might be supplying technology and explosives to Shia Muslim militants operating in Iraq, although he said he had no proof.
Hizbollah and Iran deny the accusations.
"Some of the individuals we have arrested are linked to militia groups," Brigadier Lorimer said. "But let me make it absolutely clear: we have acted against them solely because they are involved in terrorism, not because they are members of any particular political group or organisation." He added that some of those detained were also members of the Basra police force, which Iraqi officials recently conceded had been infiltrated by militia organisations.
British and US forces have been repeatedly attacked in recent months by roadside bombs packed with "shaped charges", which are much more deadly than conventional roadside bombs.
At least six British troops have been killed since July in attacks that appeared to be the work of the more powerful bombs. Mr Blair, speaking at a news conference in London with Iraq's President Jalal Talabani on Thursday said: "What is clear is that there have been new explosive devices used not just against British forces but elsewhere in Iraq. The particular nature of those devices leads us either to Iranian elements or to Hizbollah ... However, we cannot be certain of this at the present time."
Sources in Mr Sadr's office in Basra said those detained included several lieutenants in Basra's interior affairs department, which is part of the interior ministry, and an official with the local electricity authority. "They are mostly Sadr people," one of the sources said.
He said that some of the suspects were seized from the police building that was attacked by British forces last month to free two undercover soldiers who had been detained by Iraqi police. The British military said only that the raids took place in the Hadem district of Basra. Another source said that all 12 men were seized from one house.
The arrests run the risk of increasing tensions between the 8,500 British troops serving in Iraq and the local population.
After the detention of the two British soldiers last month, angry crowds of young men attacked British military vehicles with petrol bombs and rocks, forcing units to pull back.
The sources in Mr Sadr's office said the arrests took place late on Thursday, shortly after the men had broken fast on the second day of Ramadan, the Muslim holy month, in what could be seen as a slight and provoke more anger.
The British military said only that the raids took place "in the late hours" of Thursday. A spokesman said that the operation had been conducted peacefully, with no shots fired.
Mr Sadr, a young cleric with a strong following among poor, disaffected Shia in cities such as Baghdad and Basra, oversees a militia known as the Mehdi Army that has risen up twice against US and British forces over the past year.
Some in Mr Sadr's movement say that offshoots of the Mehdi Army are now operating outside of Mr Sadr's control in Basra. Mr Sadr is playing an increasingly political role, while not relinquishing his command.Reuse content