Hasan al-Khadran was injured and two of his bodyguards killed on Sunday morning when the blast occurred as his convoy passed through the al-Khalis area, about 70km northeast of Baghdad.
The car, laden with explosives, was believed to have been detonated by remote control as al-Khadran was travelling to work in a small convoy, chief of police for Diyala province, General Walid al-Azawi said.
Eight people, mostly al-Khadran's bodyguards, were injured in the attack, an Iraqi journalist told Aljazeera.
US forces, Iraqi national guards and police have sealed off the explosion site completely preventing people from entering or leaving the area, Saif al-Ajaili said.
It was not known who carried out the attack.
On 9 August, a separate car bomb attack in Diyala killed seven police officers in an apparent attempt to murder another deputy governor, Aqil Hamid al-Adili, who was wounded in the blast.
Meanwhile, a large explosion was heard early on Sunday in central Baghdad and plumes of black smoke could be seen rising from the Green Zone area which houses the headquarters of Iraq's caretaker government and the US embassy.
The blast occurred shortly after 0830am (0430 GMT).
It was not immediately known what was the exact target of the blast or whether it had caused any casualties.