The charred wreckage of a car lay in the road near Baghdad’s Kindi Hospital after the blast on Wednesday, which police had initially described as a car bomb.
“There was a man, a woman and a child in the car,” said civil defence guard Ghazi Majid Ali, speaking near the wreckage.
Police said at least two people had been killed and a third seriously wounded by the explosion.
Footage from Associated Press showed the charred shell of an Iraqi taxi in the middle of the street as Iraqi police and US troops sealed off the area. The woman and child killed were riding in the taxi, said Colonel Khubur Salih of the Iraqi police.
Footage also showed the remains of one man whom a police officer on the scene said was killed while handling the bomb. His corpse was placed on a stretcher.
The US military had no immediate information on the blast.
Resistance fighters opposed to the US-led occupation of Iraq, have often used roadside bombs to attack US military vehicles.
Iraqi sisters killed
Two Iraqi sisters working for a big US firm were killed in a drive-by shooting on Tuesday near their home in the southern city of Basra, relatives said.
Basra has been scene of many
Their father, Sadah Audishow, said he had been waiting at the window for his girls to return from work when he heard gunshots and saw a white pick-up truck speeding past.
“I had been waiting for my daughters to come home at five o’clock,” said Audishow, an Assyrian Christian who works and lives in the church with his family.
“I picked one of them up and she was dead. I went to pick up the other but found her dead too,” he said on Wednesday, his shirt still stained with blood from the night before.
Neighbours said men in the truck had opened fire on the girls’ car.
Janet and Shatha, aged 38 and 25, worked for US company Bechtel, the father said.
Bechtel has been awarded major infrastructure reconstruction contracts in Iraq.
The driver who had been taking the sisters to and from their jobs at Basra Airport, was wounded. Bechtel officials in Iraq were not immediately available for comment.
The family was taking the bodies of the girls to the northern city of Mosul for burial, the father said.
“We had received no threats,” he said. “We are peaceful people, just making a living.”
Attacks on Iraqi translators and others working with US companies in Iraq are common.
Iraqi police targeted
In Mosul, on Wednesday, a roadside bomb exploded, killing an Iraqi civil defence guard on patrol and wounding two others, police and witnesses said.
The Iraqi Civil Defence Corps, set up by the US-led occupation administration, has come under frequent attack from resistance fighters because of its cooperation with the Americans.
It was not clear who planted the bomb, which exploded near a checkpoint set up by the guards in a main street in the south of Iraq’s third-largest city, scene of repeated car bombings and assassinations in the past year.
In Ramadi, 100 km west of Baghdad, armed men have killed two policemen and wounded a third in a drive-by shooting, witnesses said. The attack was another in a wave of assaults on Iraqi officers in the weeks leading to the handover of authority on 30 June.