Smoke was seen rising on Monday near the Green Zone compound where the interim Iraqi government of Prime Minister Iyad Allawi and the US embassy are.
Allawi was not in the area at the time of the blast, officials in the prime minister's office said.
US and Iraqi troops sealed off the area and helicopters buzzed overhead. Ambulances were also seen rushing to the site.
Iraqi journalist Ziyad al-Samarrai told Aljazeera that the car bomber attempted to enter the headquarters of the Iraqi National Accord (al-Wifaq) party headed by Allawi, but he was stopped at an Iraqi police checkpoint.
The bomber detonated his vehicle at the checkpoint as he could not pass through them, he added.
According to al-Samarrai, all roads were closed and no one was allowed to approach the area after the attack.
Fighters have waged a campaign
to disrupt the 30 January polls
He added that Iraqi security forces opened heavy gunfire after the explosion took place.
More injured people, including civilians and policemen, are still arriving at Yarmuk hospital, a medical source at the hospital told al-Samarrai.
Al-Zarqawi-linked group, al-Qaida Group in the Land of Two Rivers, purportedly published a statement on the internet claiming responsibility for the attack. The statement could not be verified.
Another explosion on Monday rocked an electoral centre at a school in the new Baghdad area in southern Baghdad city, destroying the outer fence of the centre and the front of the building, al-Samarrai said.
Earlier this month, a car bomber targeted the same offices of Allawi's party. Four people were killed and 25 injured in that attack.
Fighters targeting US-led troops and Iraq's interim government have mounted frequent car bomb attacks and ambushes against Iraqi security forces in the run-up to the country's 30 January elections.