The three parked car bombs exploded virtually simultaneously, tearing through a wholesale fruit and vegetable market at the height of business in the town of Jidaidat al-Shatt.
The town is just outside the city of Baqouba, about 60 kilometres northeast of Baghdad.
Security forces sealed the roads linking Baqouba to Baghdad in an apparent effort to prevent further attacks.
Baqouba and the surrounding Diyala province was once the site of some of the fiercest fighting between US forces and insurgents in Iraq, and remains a hotbed for terror attacks.
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Iraq is suffering through a spike in violence, with recent monthly death tolls rising to levels not seen since 2008. According to the United Nations, at least 1,045 Iraqi civilians and security personnel were killed in May. The tally surpassed April's 712 killed.
The surge in bloodshed, which follows months of protests by the country's Sunni Arab minority against the Shiite-led government, is raising fears that Iraq is heading for a renewed wave of widespread sectarian violence.
The three car bombs used in today's attack were deployed in different locations in and around the market in order to inflict most damage and casualties, the police officials said.
One of the vehicles was a pickup truck loaded with produce that was parked inside the market itself.
The explosions wounded 46 people, said police officials, speaking on condition of anonymity because they were not authorised to talk to the media.