"There were many dead and wounded," Dr Daud al-Tai, head of the hospital in Latifiya, a town near Mahmudiya, said, speaking of the attack which took place late on Wednesday.
The doctor said he did not keep track of the casualties because many were taken to Baghdad.
The powerful blast ripped through the Husainiya district, where there are numerous stores and homes.
"Columns of smoke shot up in the sky after the blast, which destroyed at least four homes and 20 shops," one resident said.
Both Mahmudiya and Latifiya fall within a belt of towns south of Baghdad with a high rate of kidnappings and shootings and referred to by US soldiers as the "triangle of death".
Aljazeera has learned that the Latifiya attack involved a human bomber who blew up his car at a joint checkpoint manned by US forces and the Iraqi National Guards, killing nine people.
Thirteen more were wounded in the attack.
An Iraqi guardsman said the attacker drove his vehicle at high speed into the checkpoint, on the northeastern entrance to the town. The blast destroyed about five civilian cars.
In a separate incident, a US Humvee vehicle was destroyed when an explosive device targeting a US military patrol went off in the same area.
Violence shows no sign of abating
in the run-up to January elections
North of the capital, four Iraqi civilians were killed in two incidents in the town of Samarra, the latest casualties of fighting between anti-interim government groups and US forces, police said.
A mortar round, apparently intended for a US base, hit a house and killed a man and his child inside, Iraqi security officer Major Sadun Ahmad said.
Another man and a child died in shooting that followed a roadside bomb attack on a US patrol. Two civilians were hurt.
Anti-interim government fighters remain active in Samarra despite an assault by US forces in October.
Elsewhere, five Iraqis from one family were killed and two others injured on Wednesday when an explosive device, planted on a road in the Abu Ghraib area west of Baghdad, blew up their car as they drove over it, medical sources at Abu Ghraib hospital told Aljazeera.
Against this backdrop of ongoing violence, chairman of US Joint Chiefs of Staff, General Richard Myers, disclosed that Tuesday's attack on a US army canteen in Mosul, northern Iraq, that killed 13 American soldiers appears to have been the work of a human bomber.
"At this point, it looks like it was an improvised explosive device worn by an attacker," Myers said on Wednesday at the Pentagon.
"We have had a suicide bomber apparently strap something to his body ... and go into a dining hall," he said.
"We have had a suicide bomber apparently strap something to his body ... and go into a dining hall"
General Richard Myers,
US Joint Chiefs of Staff
US Defence Secretary Donald Rumsfeld said investigators who were rushed to the base reached that conclusion following the strike which killed a total of 22 people in the large canteen tent.
Myers said that the military would now investigate security at the base and how an attacker was able to gain access.
"He made his way on to the base, someone who was a trusted individual," Myers said.
"The base is not unsecure," he said, but, "somehow he had to get on the base with an explosive, with bombs. We'll find that out when the investigation is complete exactly how that happened."