The deaths occurred when armed fighters travelling in two minibuses opened fire at a police checkpoint, medics said.
“The attack took place on an important street in the town’s eastern al-Tahir district at about 0400pm (1200 GMT),” Brigadier-General Abd al-Salam Mahmud said.
He added that the assailants drove off before they could be apprehended.
A doctor said nine of the ten wounded were police officers.
Aljazeera reported that Saturday’s attack on Iraqi policemen in Baquba was likely to raise the spectre of renewed violence in a town known to be a stronghold of the Sunni resistance.
Earlier this month, a group allegedly linked to Abu Musab al-Zarqawi claimed responsibility via a website for an attack by a “human bomb”.
The explosion in this case killed six Iraqis, including five US-trained policemen.
Prior to that, a car bombing outside a police station in the same town on 28 July – exactly one month after the US handed over power to an interim government which it hand picked – killed 70 Iraqis, mostly prospective police recruits.