Police officials said the blast took place at the fruit and vegetable market in the Shiite district of Sadr city, killing 10 people and wounding 22 others. Several shops were damaged in the attack, they added.
Hospital officials confirmed the death toll. All officials spoke on condition of anonymity because they were not authorized to speak to the media.
Also today, a government spokesman said security forces ambushed a convoy of fuel tankers trying to illegally enter Iraq from Syria, killing at least eight drivers.
The group, known as the Islamic State of Iraq and the Levant, has been controlling areas in Iraq's Anbar province since December along with other Sunni insurgent groups.
More From This Section
Since then, government forces and allied Sunni tribal militia have been trying to dislodge the militants from parts of the provincial capital, Ramadi, and the nearby town of Fallujah, but have made no significant progress.
Iraq has seen a spike in violence since last year, with the death toll climbing to its highest levels since the worst of the country's sectarian bloodletting between 2006 and 2008.