A suicide car bomber detonated his explosives in a market late afternoon on Saturday, killing 28 people and wounding 62, the Associated Press said quoting Captain Mushtaq Kadhim of the Basra police.
Aljazeera said the car bomb exploded in a crowded market in the city's old quarter called al-Basra al-Qadima.
Nuri al-Maliki, the Iraqi prime minister, launched a one-month state of emergency in the city on Wednesday to tackle criminal gangs and Shia factions whose feuding threatens crucial oil exports.
Stores in the historic area, which sell mostly mobile phones, were badly damaged and windows smashed by the blast. Pools of blood could be seen in the streets.
Speaking to Aljazeera from Basra over the telephone, Iraqi journalist Khalid al-Hassani said that Saturday being a holiday, the market was packed with people.
He quoted Basra General Hospital sources as saying that 70 people had been killed and 34 wounded.
"Police are patrolling in the area, closing all roads leading to the place where the car bombs went off," al-Hassani said.
Basra has been under curfew, but the area where the blasts took place is difficult to control as it is popular with shoppers during holidays, he said.
Earlier on Saturday, armed men in three cars blocked a road in the upmarket Mansour district of Baghdad, the Iraqi capital, and opened fire on a Russian embassy's vehicle, interior ministry sources said.
A police source and a nearby resident said the Russians had been buying food.
The assailants killed a diplomat before kidnapping the rest of the embassy employees, reports said.
At least 62 people were injured in
Reuters Television footage showed a white 4WD vehicle with a smashed window in front of a grocery store, its boot filled with vegetables and other foodstuffs.
Blood on the pavement suggested someone had been shot outside the car, but this could not immediately be confirmed.
The head of the Russian foreign ministry information department, Alexei Sazonov, told NTV television that "according to information from Baghdad, four Russian diplomats from the Russian embassy were kidnapped while on duty and another was killed by unidentified men".
Russia's foreign ministry said it has set up a crisis cell to find and free the four embassy employees.
"Having been informed about the kidnapping of four Russian embassy employees in Baghdad, the foreign ministry has not delayed in creating a crisis cell to co-ordinate actions to bring about the liberation of these Russian citizens as rapidly as possible," a statement said.
The ministry's statement said the attack happened at 1.45pm Moscow time (1145 GMT), while Sazonov put it at 10 minutes earlier.
It was still unclear if those kidnapped included diplomats. "We are trying to clarify the situation on the spot," a spokesman for the Russian foreign ministry said earlier.
But he added: "They are all Russians, there are no Iraqis among them."
The Iraqi interior ministry said it had alerted police to be on the lookout for a car and minibus carrying the hostages.
Hundreds of foreigners, including diplomatic staff from several nations, have been kidnapped and dozens killed since the US-led invasion of Iraq in 2003.