The incident happened this afternoon in the New Baghdad section of the capital. Officials say the bomber targeted a street filled with hardware stores.
There has been no claim for the attack thus far. Hospital officials confirmed the casualties. All officials spoke anonymously as they are not authorised to brief media.
The incident comes ahead of Prime Minister Haider al-Abadi's decision to lift Iraq's longtime curfew beginning at midnight tomorrow.
The capital has witnessed sporadic bombings but has remained relatively secured amid an onslaught by the Islamic State militant group.