Interim Iraqi interior ministry spokesman Adnan Abd al-Rahman said the troops were believed to have been killed at around sunset on Saturday on a road about 150km northeast of Baghdad near the Iranian border.
The chief of the Jassan district near Baquba told Aljazeera: "We found around 50 dead bodies laying on the ground."
All those killed were Iraqis, Niama al-Tamimi said.
"We found them arranged in groups of 12 with bullets in the head," Iraqi National Guard officer Jassim al-Saadi said.
General Walid al-Azzawi, commander of the Diyala provincial police, said they were all members of the new Iraqi army, and were training in the Kirkush military camp in Baladruz.
He said they were probably returning home for leave since many were from the southern provinces. An investigation is under way, al-Azzawi added.
A website statement claimed that an armed group affiliated with Abu Musab al-Zarqawi carried out the attack, but this could not be independently verified.
Bulgarian soldier killed
In a separate development, a Bulgarian soldier was killed and three others were injured near the southern city of Karbala, the Bulgarian defence minister said.
Bulgaria has a 480-strong infantry
battalion in Karbala
Sergeant Vladimir Pashov was killed on the spot when a car bomb exploded in front of a patrolling Bulgarian convoy, Defence Minister Nokolai Svinarov said.
The three wounded soldiers were taken to a military base with injuries that were not life threatening, Svinarov said.
Bulgaria has a 480-strong infantry battalion in Karbala, but plans to move it by the end of the year to another south-central Iraqi province, Qadisiya.
In Karbala, Bulgaria has lost six soldiers so far - five died in a bomb attack on their camp in December and a sixth was killed in April in a shootout with armed fighters.
US diplomat killed
Meanwhile, US officials announced that a mortar attack on Camp Victory, on the outskirts of Baghdad, claimed the life of Ed Seitz, the assistant regional security officer at the US embassy in the capital.
He is believed to be the first US diplomat killed during the current Iraq conflict, a US Department of State official said.
The US gave no further details of the incident early on Sunday, which also injured at least one US soldier.