No group immediately claimed responsibility for the attack, the latest in a series targeting Shi'ite civilians and government buildings that have killed scores of people this week before a major Shi'ite ritual.
A further 23 people were wounded in Thursday's explosion.
Security services have been on high alert since last week, expecting more attacks before Arbaeen, which commemorates the death of the Prophet Mohammad's grandson Hussein, a major figure in Shi'ite Islam.
Shi'ites are considered apostates by Sunni militants, whose resurgence is blamed by the government partly on the impact of the increasingly sectarian war in neighboring Syria.
In a separate incident, gunmen raided the home of a government-backed Sunni "Sahwa" militia leader in western Baghdad, shooting him dead alongside his wife and two of his children, police said.
The Sahwa militias fought al Qaeda alongside U.S. troops in Sunni areas from 2006 to 2008, and are viewed as supporters of the Shi'ite-led government of Prime Minister Nuri al-Maliki.
This year has been Iraq's most violent since 2006-7, when tens of thousands were killed in strife between Sunnis and Shi'ites.
(Reporting by Kareem Raheem; writing by Suadad al-Salhy;
editing by Alexander Dziadosz and Elizabeth Piper)
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