The attack left a busy traffic circle strewn with burning vehicles, mutilated bodies and bloodied schoolchildren.
The US military said the two attackers, who died in the assault, crashed their explosives-packed cars into a three-vehicle convoy in Tahrir Square, known for its shops and a large statue of Iraqi soldiers breaking through chains to freedom.
At least 22 people were killed, including the two Americans, who were employees of the company that owned the targeted SUVs, the US Embassy said without identifying the company. Three other American civilians were wounded in the attack, the embassy said. Hospital officials said at least 36 Iraqis were wounded.
Rescue workers lifted injured school girls onto stretchers, including one with bandages wrapped around her neck and blood streaming down her legs. Firefighters fought the blaze, which sent thick black smoke billowing into the sky.
Iman Norman rushed to al-Kindi Hospital to be with her 12-year-old daughter, Lana, one of several girls injured aboard a minibus. Iman said the students climbed out of the bus windows in their bloodied uniforms after the bomb damaged its doors. Lana's injury was not serious, but one student lost an eye, Norman said.
At least 36 people were injured
in Saturday's blast, officials said
Elsewhere, a US Marine was killed by a bomb in Karmah, 80km west of Baghdad, the military said.
In a statement issued on Saturday, the US command said a 26 April raid netted a suspect, described by the US military as an important associate of Iraq's most-wanted militant, Abu Musab al-Zarqawi. Ghassan Muhammad Amin Husayn al-Rawi had helped al-Zarqawi's al-Qaida group in Iraq arrange meetings and move foreign insurgents into the country.
About 300 people have been killed in violence since Iraq's government was sworn in 10 days ago.
Bodies recovered at garbage dump
Meanwhile, Iraqi police continued to dig up bodies at a garbage dump on the northeastern outskirts of Baghdad. A dozen corpses were recovered on Friday, some of them blindfolded and shot in the head, police said. At least four more were unearthed on Saturday, according to an Associated Press photographer at the scene.
Abd al Razzaq Mutlaq, brother of one of the victims, said they were all Sunni farmers who had come to Baghdad to sell their produce. Mutlaq was with his brother early on Thursday, he said, when men wearing police uniforms detained the farmers and took them away in three vehicles.
He did not explain how he avoided being detained.
Police officials said they were still investigating what had happened to the men.
Madain is an area that has seen frequent retaliatory kidnappings and killings between Shia and Sunni groups.
Last month, scores of bodies were pulled from the Tigris River near Madain, and President Jalal Talabani said they were evidence of mass kidnappings and killings of Shia. But when Iraqi security forces raided the town, no hostages were found.
Two more bodies were found dumped on a sidewalk on Saturday in Ramadi, west of Baghdad. An AP photographer showed the victims with their hands tied behind their backs and their throats apparently slit.