The bomb was detonated by remote control on the side of a road during morning rush hour on Wednesday in Baghdad's al-Qahira district, a largely Shia neighbourhood in the north of the city, security sources said.
The explosions were targeting a passing Iraqi army patrol at a busy intersection, police 1st Lieutenant Mohammed Khayun said.
Two of the dead and eight of the wounded were Iraqi soldiers, police said.
Witnesses said a minibus with passengers had been behind the parked car when it detonated, killing all on board.
A second roadside bomb detonated as soldiers cordoned off the scene of the attack, police said.
Police are worried about an increase in violence ahead of the large Shia Shaabaniya festival on Friday that is expected to attract hundreds of thousands of people to commemorate the birth of a Shia imam.
Sunni fighters opposed to the US-backed and Shia-led Iraqi government often launch bomb attacks in crowded streets.
Meanwhile, police said on Wednesday that they had found the bodies of 19 men across the Iraqi capital, apparently shot in sectarian killings.
Hundreds of Iraqis have been killed by bombings, shootings and mortar and rocket attacks in sectarian violence that has surged this year across Iraq, particularly in the country's capital.
On Tuesday, Iraq's parliament resumed after its summer recess and voted to extend a state of emergency for a month.
The measure, which has been in place for almost two years, covers every area except the autonomous Kurdish region in the north and grants security forces the power to impose curfews and make arrests without warrants.