The Iraqi branch of al-Qaida claimed responsibility for Monday's attack in an internet message.
Both bombers wore police uniforms. Guards at the ministry gate in Baghdad opened fire on one of them, but the bullets detonated the explosives strapped to his body, a security official said.
As police crowded around his remains, a second bomber approached and blew himself up, wreaking carnage.
The dead included a major who was responsible for ministry security. A mortar shell was also fired but fell next door in the police academy, causing no damage.
The group headed by Iraq's most-wanted man, Abu Musab al-Zarqawi, said the attack was to avenge the "torture" of Sunni Muslims at the Interior Ministry.
Top officials, including Bayan Jabr Solah, the interior minister; Saadun al-Dulaimi, the defence minister; and Zalmay Khalilzad, the US ambassador, were watching the annual police celebration when the attack occurred 200 yards away.
Iraqi security forces continue to
be targeted regularly for attacks
In other news, US paper The Christian Science Monitor on Monday named a female US journalist kidnapped in Iraq as freelancer Jill Carroll, who was on assignment for the US-based paper.
Carroll was abducted in western Baghdad on Saturday, by kidnappers who killed her Iraqi interpreter, the paper said in a statement calling for her release.
The incident had previously been reported from Baghdad, but Carroll had not been identified.
"We are urgently seeking information about Ms Carroll and are pursuing every avenue to secure her release," said Richard Bergenheim, the Monitor editor.
Return to civilisation
French hostage Bernard Planche, a 52-year-old engineer who escaped at the weekend after five weeks of captivity in Iraq, arrived back in France late on Monday saying he was delighted to "return to civilisation".
Planche was held in captivity for
five weeks by an Iraqi group
In another development, the electoral commission announced a delay in releasing its findings into fraud allegations in last month's Iraqi elections.
"There are still four to five small outstanding items," Abdul Hussein al-Hindawi, a member of the Iraqi electoral commission board, told AFP.
The commission said the findings would be announced next weekend, after the three-day Muslim Eid al-Adha holiday.
Meanwhile, Ibrahim Bahr al-Ulum, who last month said he was resigning his job as oil minister, has returned to his post, the government announced.
The developments came as a senior Shia leader accused US officials of trying to hobble Iraqi security forces in their fight against fighters who frequently target the country's majority Shia community.
Abdel Aziz al-Hakim, head of the leading Supreme Council of the Islamic Resistance in Iraq, warned in an interview on CNN television that Shias were losing patience and might take the law into their own hands.
One politician says Shias might
take the law into their own hands
The US ambassador, for his part, renewed earlier warnings that security institutions should be reformed and militias disbanded.
"They are a threat to Iraqi security and could produce future civil conflict and warlordism," he said in a column published in the Wall Street Journal.
Khalilzad also urged Iraqis to form as broad-based a government as possible to undermine anti-government fighters.