Medical officials said many of the dead were charred beyond recognition and people were crowding the local hospital trying to identify the remains of relatives.
An Al Jazeera cameraman at the scene said that the suicide car bomber drove his vehicle through at least one military checkpoint before detonating the explosives.
The US military condemned the bombings and said they appeared to have been carried out by al-Qaeda in Iraq.
Diyala has been one of the main battle grounds between Iraqi security forces and al-Qaeda fighters in recent months.
Al-Qaeda regrouped in northern provinces such as Diyala after being pushed out from western Anbar province and Baghdad.
Diyala also forms a part of the so-called Sunni Triangle, a termed created by the US military. The area is a stronghold for Sunni anti-government fighters.
Al Jazeera's Owen Fay, reporting from Baghdad, said that with this attack, the Iraqi government is in the midst of battling more fighters.
"The government now has to focus on both Sunni and Shia fighters, amid a situation where they are already struggling to secure regions of the country," he said.
Al-Sistani aides targeted
Also on Tuesday, three aides to Iraq's top Shia cleric escaped assassination in separate attacks in southern Iraq, but two of them were seriously injured.
Assailants ambushed a vehicle carrying Sheikh Ali al-Fudhaili, seriously wounding him and killing his driver in Basra, police say.
A later attack in Basra involving four attackers left Sheikh Ali al-Khafaji also seriously wounded.
And Habib Salman al-Khatib's car was fired on in the city of Kut, but he escaped unhurt.
The three clerics are representatives of Grand Ayatollah Ali al-Sistani.Ramadi attack
In another attack, a suicide bomber blew himself up inside a restaurant in Ramadi in Anbar province, killing at least 12 people, the city's police chief said.
Tareq al-Youssef said another 14 people were wounded in the attack, which occurred at around 12.30pm local time (0930 GMT).
Al-Youssef said the restaurant was near the western outskirts of the city.
Ramadi, 100km west of Baghdad, was a stronghold for Sunni fighters in the aftermath of the toppling of Saddam Hussein's government by US-led forces in 2003.
In a separate incident in Baghdad at least three people were killed and eight others wounded by a car bomb on a police convoy.
A car bomb in the same neighbourhood killed one person and wounded six others, including four policemen.
A further two car bombings occurred in the northern city of Mosul. Police said the first struck a US convoy and the second was detonated when police cordoned off the area.
Investigators are not stating whether they believe the series of bombings are related.
Since Monday, more than 80 people have been killed in attacks across Iraq, which come at a time security forces are fighting street battles with Shia fighters in Baghdad's Sadr City.
At least six people were killed in a gunfight between US troops and Shia fighters in Baghdad's Sadr City, the US army said.
The clash erupted during a US security operation in the Baghdad bastion of Muqtada al-Sadr, the Shia leader.
"Coalition forces took on small-arms fire during an operation in As-Sudayra early Tuesday," the US military said referring to an area inside Sadr City.
It said that in return fire, US-led forces killed three fighters.
The Mahdi Army of al-Sadr have been engaged in sustained clashes with US and Iraqi forces for more than a week in Sadr City, in which around 95 people have been killed so far.