"The gunmen stormed into the bakery and killed workers while they were baking. They had done nothing bad," said one man who joined other local residents outside the small store after the attack.
"The gunmen stormed into the bakery and killed workers while they were baking - they had done nothing bad"
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Dozens of bakeries have been attacked in Baghdad in recent months during Shia-Sunni sectarian violence.
The attack left pools of blood on the floor, and furniture overturned during the panic.
In another attack, a car bomb went off near a court in Palestine Street, killing two civilians and wounding another five.
One person was also killed and nine injured when a bomb on a bicycle went off near a petrol station in Baghdad's al-Amel neighbourhood.
Sectarian violence and attacks by armed groups kill hundreds of people a week in Baghdad and the Iraqi government has struggled to assert the independence and credibility of its security forces as other armed groups have grown in power.