A police spokesman said the explosion on Saturday in Nahrwan, 45km from Baghdad, wounded 38 people, Reuters reported.
"It was not a suicide bomb," he said. "A car parked in the middle of the square and later it blew up."
More than 200 people have been killed in bombings and shootings in and near Baghdad this week, including at least 114 in a single bomb on Wednesday that targeted a crowd of day labourers waiting to be hired in a Shia Muslim district.
Abu Musab al-Zarqawi, leader of al-Qaida in Iraq, which has claimed responsibility for many of the deadliest attacks in the country, last week proclaimed all-out war on majority Shia.
Iraqi security forces were out in force on Saturday as thousands of Shia pilgrims converged on the central holy city of Karbala for the major festival of Shaabaniya amid the threat of sectarian attack by al-Qaida, AFP reported.
Shia pilgrims are converging in
Karbala for a festival
Hundreds of police commandos and Shia militiamen lined the main highway from the capital to provide protection to the faithful, many of whom were making the 110km journey south on foot.
Monday's festival, which falls on the 15th of the month of Shaaban in the Islamic calendar, marks the anniversary of the birth more than 1000 years ago of the Shia 12th and last imam, Mohammad al-Mahdi, whom the faithful believe will one day return to guide humanity.
The tight security for the festival followed a spate of bombings claimed by al-Zarqawi's group.
But the threat of sectarian violence drew condemnation from the main Sunni clerical body, the Association of Muslim Scholars.
"What Zarqawi said is very dangerous and plays into the hands of the occupier who wants to split the country and spark a sectarian war," it said.
"From a religious point of view, you (Zarqawi) must renounce your threat because it abuses the image of jihad (holy war)"
Association of Muslim Scholars
"From a religious point of view, you (Zarqawi) must renounce your threat because it abuses the image of jihad (holy war)," it added.
"Iraq's Shia are not responsible for the government's sectarian policy."
US forces have arrested the two leaders of al-Qaida in the main northern Iraqi city of Mosul, a statement said on Saturday.
The US statement said coalition forces raided a suspected al-Qaida hideout in Mosul on 5 September.
Captured were Taha Ibrahim Yasin Becher, known as Abu Fatima, identified as al-Qaida's "emir of Mosul," and Hamed Saeed Ismael Mustafa, known as Abu Shahed, and identified as the organisations "west Mosul emir."
Taha Ibrahim Yasin Besher (L)
and Hamed Saeed Ismael Mustafa
The statement said Abu Shahed was responsible for organising al-Qaida activities in west Mosul and was in line to succeed Abu Fatima in the event of his death or capture.
Separately, Iraqi sources said a leader of the al-Qaida-linked group Ansar as-Sunna was seized overnight near the northern town of Tuz Khurmatu, the scene of Friday's attack on Shia Muslim worshippers.
Iraqi and US forces captured Norman Mohammed, "one of the most important Ansar as-Sunna leaders in northern Iraq," Colonel Mohammed Fatah said.
He was seized in the village of Duzari, near Tuz Khurmatu, where a bomber killed 11 Shia worshippers and wounded 24 as they left a mosque after Friday prayers.
Fatah said 700kg of explosives and mortar rounds were found at the site of the arrest.
One Iraqi was killed and 17 were wounded, three of them soldiers, when an Iraqi army patrol was hit by a car bomb in the town of Baquba, just north of Baghdad, police said.
Two Sudanese truck drivers ferrying supplies to US forces were killed in west Baghdad and 11 bodies were found at various locations. All had been handcuffed, blindfolded and shot at close range.
In the aftermath of the assault on Tal Afar, US officials stepped up their criticism of Syria for failing to do more to seal its borders to Arab volunteers seeking to infiltrate Iraq.
US commanders say they killed or captured a number of foreign fighters in Tal Afar who had turned the town into a staging post for volunteers who had slipped across the Syrian border to the west.
Wounded Iraqis wait for treatment
after a car bomb blast in Baquba
"Innocent people are getting blown up in Iraq because Syria is allowing its territory to be used by terrorists bent on sowing murder and mayhem in Iraq," said State Department spokesman Adam Ereli.
Syria has denied turning a blind eye to infiltrators and insists it is ready to cooperate with US and Iraqi government forces in tightening security at the border.
The Syrian embassy in Washington vowed on Thursday "to do whatever it takes" to seal the border.
Sudanese lawyers on Saturday slammed what they said were US massacres in Iraq and vowed to join deposed leader Saddam Hussein's defence team, calling his trial for alleged war crimes "illegal".
The Sudanese Bar Association condemned "the wholesale massacres being perpetrated by the American forces of occupation in Iraq," lawyer Taiseer Mudathir told journalists at the association's Khartoum offices.