Around 1,000 people have been killed across Iraq in the past week in suicide bombings, shootings and fighting between security forces and militants, according to figures compiled from official sources by Reuters new agency.
Rescue workers picked through blood-stained rubble looking for more bodies.
A bulldozer was called in to clear debris from what was left of two and three-storey buildings.
Nuri al-Maliki, the Shia prime minister, blamed the blast on Sunni fighters and supporters of the late Saddam Hussein.
A senior government source said: "The government is determined to get rid of the terrorists and the outlaws. Yesterday's bombing is just more evidence of their evil."
Al-Maliki's office said in a statement late on Saturday that the government would "cut off their [fighters'] roots, their sources and their supporters".
The prime minister vowed in January to launch a crackdown in the capital against insurgents who have defied attempts by his government to get control of security, but it has not yet begun.
Similar campaigns have failed in the past.
Ordinary Iraqis are frustrated at the government's inability to curb violence.
Shias in Sadriya said the Mahdi Army militia of Shia cleric Moqtada al-Sadr, a key political ally for Al-Maliki, should handle security, not government forces.
The Pentagon has said the Mahdi Army poses a greater threat to peace in Iraq than Sunni Islamist al-Qaeda.
An interior ministry source said efforts would be made to tighten control over roads leading into Baghdad, with attention paid to searching lorries.
Al-Maliki's critics say an offensive last summer failed because the Iraqi army committed too few troops and because he was reluctant to confront the Mahdi Army.
The Iraqi government said on Sunday that many of the Sunni fighters behind bombings in the country had arrived through neighbouring Syria.
Ali al-Dabbagh, an Iraqi government spokesman, said: "I confirm that 50 per cent of murders and bombings are by Arab extremists coming from Syria.
"They come from Syria, we have evidence to prove it. We have already proved it to our brothers in Syria.
"Syria closes its eyes. As we have said before and we say again today, we are facing a bloody and painful day for us in Iraq as a result of Syria's lack of seriousness in controlling the border."
Syria says it is doing its best to control its border with Iraq.
On Friday, al-Dabbagh also criticised what he called Syria's "hostile" attitude to Iraqi refugees.
He said: "Syria imposed measures on residency which are very rare.
|The Sadriya market blast on Saturday killed|
more than 330 people in Baghdad [AFP]
By these measures they will put hundreds of thousands of Iraqis in a dire situation, this is not a friendly attitude, but a hostile attitude."
Iraqis were previously granted renewable three-month residency permits, but Syria now issues two-week permits that can be renewed just once, upon presentation of documents including a rental contract.
Otherwise, Iraqis must return home for a month before they can apply again.
More than two million Iraqis have sought refuge abroad, including at least 600,000 who fled to Syria, according to the UN High Commissioner for Refugees.
Al-Dabbagh said "Iraqi refugees were headed for disaster" in Syria and that recent decisions provoked "anger among Iraqis over the Syrian attitude".