A group of boys and young men were playing football on Sunday when the mortars hit, sending shrapnel into the air, said Dr Walid Hamid at the al-Kindi hospital.
"Two children were killed and eight wounded, three of them seriously," Hamid told reporters.
Earlier on Sunday, a US Air Force C-130 transport plane was struck about 22km west of the airport as it took off at approximately 5pm (14:00 GMT), US officials said.
The aircraft returned to Baghdad airport and landed safely.
Brig Gen Mark Kimmitt, occupation deputy operations chief, confirmed the attack but did not specify the exact location. Kimmitt said that one of the personnel aboard was wounded and later died.
He did not say how many people were on the plane.
The name of the individual who died was withheld pending notification of next of kin. Pilots have in the past reported ground fire near the airport.
Iraqi police attacked
Meanwhile, an Aljazeera correspondent in Baghdad reported that six Iraqi police guards were killed in an attack on a checkpoint northeast of the city of Baquba by unknown fighters armed with anti-tank rockets.
Iraqi police are expected to take
control of the security situation
"The attack was launched shortly after 17:00 (13:00 GMT) by armed men on a National Guard checkpoint at Jalawla," some 180km from Baghdad, said General Walid Khalid Abd al-Salam, chief of Diyala province.
"The assailants attacked the position using anti-tank rockets
and automatic weapons, killing six members of the National Guard and wounding four others," he said.
"One of the assailants, who were in a car, was killed in the
exchange of fire and the others fled," said the Diyala police chief, without giving the number of attackers.
Also on Sunday, an unidentified group of purported Iraqi fighters who had seized a Pakistani driver threatened to behead him within three days unless Iraqi prisoners are released, al-Arabiya television reported.
"This man was taken after an attack on a US base in Balad," said one of the masked fighters on a tape al-Arabiya said it had obtained.
"You must release
our prisoners held
near the US base in Balad, in Dujail, in Yathrib, in Samarra
and near Abu Ghraib"
"You must release our prisoners held near the US base in Balad, in Dujail, in Yathrib, in Samarra and near Abu Ghraib. You have three days from the date of this recording and after that we will behead him. We have warned you."
The tape also showed the Pakistani man, who was wearing an
identity card given to contractors linked to the US military,
urging Pakistani President Pervez Musharraf to shut down his
country's embassy in Iraq.
The ID named him as Yusuf Amjad, an employee of US contractor Kellogg Brown and Root (KBR). KBR is a subsidiary of the giant Halliburton company which was once headed by US Vice President Dick Cheney.
Like other contractors for the US-led occupation, it has suffered mounting attacks on its staff.
Also, a rocket attack on a US base in Baghdad killed a US soldier, the US military said. The death brought to at least 855 the number of US soldiers killed in action in Iraq since last year's invasion of the country.