The killings were carried out in the middle of the crowded main market in the Zab area of Kirkuk province.
The IS jihadist group spearheaded a sweeping militant offensive in June that overran large parts of the country, including territory in Kirkuk.
Iraqi security forces and pro-government fighters are battling to regain ground with backing from a US-led air campaign and have retaken some areas, but three key cities are still in the hands of the militants.