Three other Iraqis, including a translator with US forces, were injured in the attack on Tuesday, said Iraqi police Major Khatan Jabir. There were no casualties among US troops.
One of the injured Iraqis is in serious condition.
A US military Humvee was parked in the middle of the road, shortly after the blast in the Karrada neighbourhood, beside a shattered concrete road divide where the bomb appeared to have been planted.
The explosion cracked windows on the street lined with shops selling vegetables and groceries.
“They’ve not killed any Americans, just Iraqis as usual. We consider it terrorism,” said shopkeeper Karim Abbas bitterly.
People said the dead man worked in a nearby shop.
Meanwhile, Iraqi police said they had reinforced security in the capital in anticipation of more attacks over the New Year.
More than 11,000 police officers had been deployed, said Baghdad police chief General Hasan Ali Ubaidi. “Police are going to step up patrols, set up checkpoints and intensify operations across the city,” said Ubaidi.
Occupation forces on Christmas Eve warned soldiers to be on
heightened alert against attacks through the New Year’s period.