"Three Iraqi civilians died and six others were wounded in a suspected vehicle born improvised explosive device detonated at 8am (0400 GMT) in central Baghdad," a US military statement said.
The incident took place several hundred metres away from the embassy building.
Australia's defence force spokesman said in Canberra that three Australian troops were slightly injured in the attack - the first such direct attack on Australian troops in Iraq.
Interior ministry spokesman Colonel Adnan Abd al-Rahman said the bomb targeted the vehicles as they passed through the neighbourhoods of Karrada and Jadiriyah.
An AFP reporter at the scene saw a damaged army vehicle, with its tyres flattened by the force of the blast.
A huge cloud of smoke was seen rising over the western bank of the Tigris. US helicopters were seen flying overhead.
Last week, the Australian government announced that the embassy would be moved early next year from its current location to the heavily fortified Green Zone, which houses the US and Iraqi leadership.
A car bomb blast on 17 October hit a cafe close to the Australian embassy, killing six people. No Australians were hurt in that attack, which authorities believe was aimed at an Iraqi police convoy.
One person died in the
explosion in Mosul
Another car bomb exploded at the regional government building in the northern Iraqi city of Mosul killing a tribal leader and two of his associates, local government officials said.
The officials said the bomb had been planted in his car and blew up when the vehicle reached the car park of the Nineveh region government headquarters in Mosul, 390km north of Baghdad.
The official was the head of the National Assembly of Iraqi Tribes in the northern part of Iraq.
A second car bomb targeted the commander of the Iraqi Facilities Protection Service, who escaped unharmed. Brigadier Muataz Taha said three of his guards were wounded and two vehicles damaged in the blast.
Elsewhere on Monday:
- A car bomber hit a US convoy near the western Iraqi town of Khaldiya, local police and witnesses said. They said several vehicles had been damaged in the blast and spoke of several US casualties. The US military had no immediate information on the attack.
- Three Iraqis were killed and four others injured during violent clashes between US forces and armed men in eastern districts of Ramadi city, Aljazeera has learned. The clashes erupted after a US military headquarters, west of the city, had been bombed.
- In Haditha City, a policeman was killed and two others injured when their patrol clashed with fighters in the Basatin area.
- In Samarra, a US military vehicle was damaged after being hit by an explosive device in al-Sikak neighbourhood.
- In Kirkuk, a huge fire erupted on Monday morning at an oil pipeline in al-Multaqa town, south of the city.