A police official said initial reports indicated the bomber rammed his vehicle into a bus carrying ministry employees at 7.50am (0345 GMT) on Monday.
Police sources said most of those killed were policemen.
The explosion also wounded 10 policemen and eight government employees, said police Captain Nabil Abd al-Qadir.
The employees were just arriving for work at Iraq's Oil Ministry, Irrigation Ministry and National Police Academy, Abd al-Qadir said.
In Baghdad, the official work day generally begins at 8am.
An Iraqi journalist, speaking to Aljazeera said police sources confirmed that the bus was carrying more than 40 Iraqi Oil Ministry employees.
Toll may rise
The toll is expected to rise as some of the injured are in critical condition, said Walid Khalid.
Some of the wounded are in
Iraqi Oil Ministy officials meanwhile said the bus was not the direct target of the explosion as the vehicle was on the opposite side of the street to where the explosion occurred.
The explosion was so fierce that it hit the bus, damaging it, sources added.
Baghdad has in recent weeks witnessed a spate of attacks targeting US forces and the government's security apparatus.
Abu Ghraib releases
In related news, the US military began to release 1000 Iraqi detainees from Abu Ghraib prison at the request of the Iraqi government, in honour of the Muslim holy month of Ramadan.
The first 500 prisoners were loaded onto Iraqi public buses and driven out of the prison on Monday morning. The rest will be freed later this week, the US military said.
Half of the 1000 prisoners to be
released have been freed
Arab governments often pardon non-violent offenders during Ramadan, which is expected to begin on 4 or 5 October.
Each year, the start of the month is decided by senior Muslim clerics after they sight the sliver of the moon appear in the sky.
But Monday's action, and the release of 1000 other Abu Ghraib detainees last month, also appeared to be part of the Iraqi government's effort to persuade Iraqis, especially the Sunnis, to vote in the 15 October national referendum on Iraq's draft constitution.
Oil junction bombed
Meanwhile, armed fighters bombed a junction on Iraq's crude oil export pipeline to Turkey and briefly detained nine employees of the complex on Sunday, an oil official said on Monday.
The official said the blast near the northern oil centre of Kirkuk was likely to further delay efforts to resume oil exports through Turkey, which had been paralysed by sabotage bombings.