The Sadriya car bomb was near a market and is thought to be the deadliest attack since the US-led coalition invasion of the country in 2003. The market was being rebuilt following an attack earlier this year.
Witnesses told the Reuters news agency that women and children were among the dead, with some people burned alive in mini-buses.
The Iraqi prime minister Nouri Maliki condemned the attack and ordered the arrest of the army commander responsible for securing the Sadriya district.
Another explosion at an Iraqi army checkpoint in Sadr city near Baghdad left more than 30 dead while a bomb in the capital killed about a dozen.
The number of bombings in such a short space of time have led some to suggest that they were coordinated attacks.
Al-Qaida militants are often blamed for bombings towards Shia communities and there are fears that the attacks could inflame sectarian tensions in the region.
The bombings undermine the expressed confidence of the Mr Maliki, who said yesterday that the need for foreign forces' control will ease throughout the years.
In comments made at the handover of Maysaan province in the south of the country from British control, Mr al-Maliki said: "It will be province by province until we achieve [this transfer] before the end of the year."
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