A security official said the bus had been heading towards the Shi western district of Kadhimiyah, when it exploded.
British helicopters down
Two British personnel died and another was seriously injured when two helicopters crashed north of Baghdad on Sunday, Britain's ministry of defence said.
"Now that next of kin have been informed, I can confirm that the two helicopters reported this morning as having crashed north of Baghdad earlier today were, in fact, both UK helicopters," Des Browne, the British defence secretary, said in a statement.
"Sadly, two personnel have died and one is very seriously injured. All of these were UK personnel," he said.
The statement said initial reports indicated the crash was an accident and not the result of an attack.
It was earlier reported that the two helicopters were US military helicopters.
Fighters shot down eight helicopters during a month-long period earlier this year, killing 28 people, mainly American soldiers. Six of those aircraft were US military helicopters and the other two belonged to a private American security company.