Initial death tolls fluctuated widely, with security officials reporting 47 dead, later revised to 34 by Akhil Khazali, the city governor.
Police also imposed a vehicle curfew in the city, which is a magnet for hundreds of thousands of Shia pilgrims across the world who visit the revered Imam Hussein shrine.
"The explosion was a huge one. It took place in a crowded area," said Khalid al-Daami, head of the Karbala's city security committee, was quoted as saying on Saturday.
Rescue workers could be seen evacuating casualties, including the body of a child carried away on a stretcher, in footage aired on state television.