A US military source said two people were killed and about 17 Iraqi civilians were injured in Monday's blast, according to Aljazeera's correspondent Imad al-Atrash.
The source said there were no casualties among occupation soldiers. A US occupation soldier said the blast was caused by a car bomb.
The explosion took place in al-Kindi street near the Green Zone, the US-led occupation authority's headquarters in Baghdad.
While US occupation troops practice strict security measures within the Green Zone, it is still difficult for them to control the situation outside the massive compound.
Later in the day a site close to Baghdad airport used by the US occupation forces as headquarters was attacked by mortar shells and columns of smoke were seen billowing from the site.
The attacks follow the death of a US soldier on Monday of wounds sustained a day earlier in a mortar attack in northern Iraq.
Violence has not abated ahead of
a 'transfer of sovereignty' in June
Armed men killed a senior official of an Iraqi party as he was driving home late on Sunday.
Qahtan Kadhim al-Rubaai, the head of the Iraqi Islamic Party's information department, was attacked by four armed men as he was leaving Baghdad, reported a party official.
Another US soldier was killed in southwest Baghdad just before midnight on Monday.
Two more were wounded in the roadside bomb attack.
The death brings to seven the number of coalition troops killed in the past 48 hours and 925 since Iraq's invasion.
Al-Sadr, occupation battles
In other news, US occupation forces and followers of Iraq Shia leader Muqtada al-Sadr have fought near the city of Najaf overnight, the fourth day of clashes since al-Sadr offered a truce.
Two US soldiers and over a dozen Iraqi fighters were killed late on Sunday around Kufa near Najaf when one patrol was ambushed by resistance fighters. The second died when his tank was struck by a rocket-propelled grenade.
Local residents and al-Sadr's al-Mahdi army fighters in Kufa said tanks advanced into the town towards the main mosque and clashed with Iraqi fighters based around it for about two hours at midnight.
Signs of the fighting could be seen on one of the mosque's walls. A nearby police station also sustained damage.
Five civilians from the same family were wounded, staff at the local hospital said.
One al-Mahdi Army squad leader said his men were abiding by the truce offer: "The Americans are trying our patience," he said.
Civilians were injured in clashes
No comment was immediately available from the occupation.
US commanders said they were willing to wait several days after the truce offer on Thursday, to assess whether it had succeeded in ending two months of fighting in Najaf and nearby areas.
On Monday morning, US troops handed out leaflets in Kufa offering cash in return for weapons, a tactic used elsewhere in an effort to persuade Iraqi fighters to disarm. In a country awash with armaments, however, full disarmament is unlikely.
Clashes in south
In the southern town of Samawa where Japanese troops are based, an explosion was heard near a highway to the south of the town.
A bomb concealed in a van was detonated as a Dutch patrol approached the vehicle, but there were no casualties, reported Dutch troops at the scene on Monday.
Earlier reports quoted some witnesses as saying a Japanese military vehicle might have been in the vicinity.