"They park the vehicle, the adults run out and detonate it with the children in the back ... the brutality and ruthless nature of this enemy hasn't changed."
The attack on Sunday killed five people, including the children, and wounded seven, a defence official said.
New tactic
Barbero said the operation revealed a new tactic, although he said US forces had only seen the one incident involving children.
He said the use of chemicals in bomb attacks had also increased.
Three bombs using chlorine were detonated over the weekend, bringing to six the number of bombings using chemicals since January.
"High-profile" suicide and car bomb attacks by Sunnis against Shia have also not abated, Barbero said.
But he said the US-led security crackdown in Iraq's capital had yielded some success with a reduction in murders and executions of civilians.
He also said hundreds of families have returned to Baghdad and the number of tips from Iraqi civilians about insurgent activity hit its highest mark ever in February.