Two Britons were among the dead in the rush-hour bombing on the east bank of the Tigris river on Monday morning, Iraq's new Prime Minister Iyad Allawi announced.
He said they were employed in the reconstruction of Iraq's battered electricity sector, but did not identify their nationalities.
A charred corpse in a burnt 4WD vehicle and four bodies covered in sheets were seen at the site of the blast by Sadoun Street, a main commercial boulevard lined with restaurants, shops and residences.
A convoy of vehicles - two tan-coloured Mitsubishi 4x4s and a GMC - were speeding down the street, not far from the main headquarters of the US-led occupation across the river, when the explosion struck at 8:15 am (0415 GMT).
Major Muhammed Saleh, the top policeman at the scene, said: "It was a three-car American convoy. A suicide car bomber in a small Volkswagen Brazilia drove between the cars and blew himself up."
Bystanders rushed to the aid of
those injured by the car bomb
Other witnesses said they thought a parked car was detonated by remote control as the convoy sped by, but there was no independent confirmation.
Khamat said the 4x4s destroyed by the blast looked like the cars used by the US-run occupation authority.
The blast blew one of the vehicles off the road and on to a central grass square where it lay burnt out, on its side. Smouldering flesh was seen lying near the site.
An angry crowd gathered quickly around the two other vehicles that stood charred but intact on the road. Chanting "No, no, America! No, no, Governing Council," the Iraqis hit the vehicles with sticks and threw stones.
"I rushed up to the building and took out six dead bodies and two people who were alive"
Saad Jasim Muhammad,
Police fired shots into the air but were unable to disperse the crowd, who jumped on to the vehicles and then set fire to them. They lobbed bottles of alcohol from one of the shops that was obliterated in the bomb into the flames.
The area had been hit by a small roadside bomb just 15 minutes before the major blast, but it caused no real damage, he added.
Saad Jassim Muhammad, 24, who was eating in a restaurant when the attack struck, said, "I rushed up to the building and took out six dead bodies and two people who were alive."
Since the new Iraqi caretaker government was unveiled on 1 June, there has been a wave of car bombings and assassinations of government officials.