A senior police official said the policemen were attacked on Sunday as they travelled home to Baghdad from a training centre that had come under fire the previous day.
Major-General Ghassan al-Bawi, Diyala province police chief, said: "They were being brought home to Baghdad from the training centre for a new emergency response brigade when insurgents set up a roadblock to stop them and opened fire."
Baquba, 65km north of Baghdad, is an area with a mixed population of Shia and Sunni Arabs and it has seen relentless bloodshed in recent months.
An interior ministry official said the buses were stopped by a roadside bomb, but that most of the deaths were caused by fighters firing on the passengers.
Some of the officers thought to have been onboard are missing, and many of the bodies left behind were booby-trapped, he added.
"There is a plan in our province to train 2,500 policemen to form a new rapid intervention brigade. We have been given a former police dog training school outside Baquba," al-Bawi said.
"Tonight the terrorists attacked them outside the school."
Iraqi security forces are a target for fighters who condemn those who sign up with the US-led forces as collaborators.
Elsewhere six US soldiers were killed in Baghdad on Sunday, the US military reported on Monday morning.
At least 86 US soldiers have been killed in Iraq so far this month making this the deadliest month for US troops there since January 2005.