Twenty-five people were killed and 60 more wounded when a car bomb tore through a busy market area in southwestern Baghdad on Tuesday, police said.
At least two buildings were completely destroyed and many others badly damaged when the bomb went off near a popular outdoor market in Amil, a mostly Shi'ite district.
Television footage showed cars and shops on fire and a huge crater in the centre of the main street. Local residents carrying buckets of water rushed to help firefighters douse blazes on either side of the street.
One body lay covered by a yellow sheet, while residents carried more of the dead in blankets out of the rubble. Another shaken resident climbed cautiously down the sides of partially destroyed buildings.
"There was a blast. It killed a large number of innocent people, poor people who worked to earn a living," one man told Reuters Television.
Thousands of extra US and Iraqi troops have been deployed around Baghdad and other areas as part of a three-month-old security crackdown aimed at dragging Iraq back from the brink of all-out sectarian civil war.
The crackdown is part of a plan to buy time for Prime Minister Nuri al-Maliki's Shi'ite-led government to meet a series of political benchmarks set by Washington.
The benchmarks aim to promote national reconciliation and to draw Sunni Arabs, dominant under Saddam Hussein, into the political process and away from the insurgency.
US officials say the security crackdown has helped reduce the number of targeted sectarian killings between Sunnis and majority Shi'ites but car bombings are a regular occurrence across Iraq.
Despite the frequency of such attacks, Tuesday's bombing in Amil resulted in the largest death toll in a single attack for more than a week.
Parliament was due to sit on Tuesday to discuss several important issues including constitutional reform, one of Washington's benchmarks.
Sunni Arabs, who make up the backbone of the insurgency, have long demanded changes to a constitution they say concedes too much power to Shi'ites and ethnic Kurds.
Non-Arab Kurds from Iraq's oil-rich north in turn worry about the constitution's wording on the Arab identity of Iraq.
A constitutional reform committee was due to send a draft plan to reform the constitution to parliament on Tuesday.
A Kurdish delegation is also in Baghdad for talks with the central government to iron out last-minute disagreements on a revenue-sharing oil law, another important political benchmark.