The bombing took place at about 1 p.m. in an area where large attacks have been infrequent because it is encircled by U.S. and Iraqi security forces and has its own neighborhood security.
The blast also wounded at least 34 people, said an Iraqi police official. A Ministry of Interior official confirmed the casualties.
Both officials spoke on condition of anonymity because they were not authorized to release the information.
There are an estimated 2.5 million Shiites living in Sadr City, a stronghold of anti-American cleric Muqtada al-Sadr.
Violence has decreased dramatically in Iraq, though insurgents continue to target civilians and security forces. The U.S. military has expressed concern of a possible rise in violence ahead of next year's national elections.
Also Monday, gunmen stormed a checkpoint north of Baghdad, killing five members of a Sunni anti-al-Qaida group, according to a police official, who also spoke on condition of anonymity for the same reason. The U.S. military confirmed the attack.
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