Shortly before the blast on Tuesday evening, the sound of mortars being fired echoed across the capital.
The explosion struck an area not far from the Green Zone, the headquarters of the US-led occupation in Baghdad that has been repeatedly targeted by mortar and rocket attacks in recent months.
US troops sealed off the area but had no immediate information on the cause of the blast.
Police officers killed
Also on Tuesday, gunmen killed three Iraqi police officers in a drive-by shooting in the northern city of Mosul, according to police at the scene.
The attack follows the killing of four US missionaries in the city in an ambush on Monday evening.
In all, six foreigners, including four Americans and two Germans, along with six Iraqis have been killed in the past 24 hours in separate attacks in Iraq.
Armed attackers killed an Iraqi female translator working with US occupation forces in Mosul, raising the toll to five in the city during the past 24 hours.
Assailants drove up to the translator's car on Tuesday and fired machineguns, hitting her in the head and shoulder, according to police.
There has been increased violence
in Mosul in recent days
Earlier, an American missionary injured in a drive-by shooting in the northern city of Mosul died, raising the number
killed in the attack to four. A fifth American was being treated at a US military hospital in Mosul, said US occupation authorities on Tuesday.
The victims in Monday’s attack were Baptist missionaries of the Virginia-based Southern Baptist International Mission Board. Hospital officials said two of the dead were women.
A spokesman for US occupation forces in Mosul said the missionaries were travelling in one car when they came under attack.
An off-duty Iraqi policeman found the car shortly after the shooting and took the wounded to an Iraqi hospital. US army air medical evacuation helicopters later transported them to a combat support hospital in Mosul.
Iraqi police and the FBI were involved in the investigation. The victims were attacked by two or three men in a car, said witnesses.
The presence of missionaries in the majority-Muslim country is highly resented by locals as another element of foreign interference. About 100 are reported to have entered Iraq since Baghdad fell last April.
The International Bible Society has distributed 10,000 books in Arabic, titled Christ Has Brought Peace.
Meanwhile, two German civilians and two Iraqis, including a driver and a policeman, were killed in a drive-by shooting south of Baghdad on Tuesday, said police and hospital officials.
Ethnic tensions have been
simmering in Kirkuk
Two Iraqi police were also wounded in the attack on the outskirts of the town of Mussayab, 70km south of Baghdad, said medical sources at Mussayab General Hospital.
Dr Jamal Kadhim, head of the emergency department at Mussayab General Hospital, said he also saw the passports of two Germans.
He believed they were water experts working on a development project. Police chief Col Iyad Umran confirmed two Germans were killed. He said they were working on a project at al-Razzaza, a lake near the southern city of Karbala.
The six victims were travelling in two cars when they were attacked, said Umran. He said the Germans were carrying weapons because they had been attacked previously in the same area.
In the northern city of Kirkuk, tensions flared after an Arab member of the city council was shot and killed with his bodyguard as he drove to a meeting on Monday, the second Iraqi official in the region to be killed in two days.
Agar al-Tawil was killed when gunmen fired from a car before speeding off.
Ethnic tensions between Kurds, Arabs and Turkmen have been simmering in Kirkuk. Kurds want to make Kirkuk, the centre of a Kurdish federal region in the new government.