The explosives-laden car went off at the wholesale Jamila market in Baghdad's Shiite district of Sadr City, a police officer said. The explosion also wounded 25 other people, he added, saying the death toll was expected to rise further.
A medical official confirmed the casualty figures. Both officials spoke on condition of anonymity as they aren't authorised to talk to journalists.
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At least one soldier was seen being evacuated from the scene, which was sealed off by security forces.
No group immediately claimed responsibility for the attacks, though the attack had all the hallmarks of the Islamic State group, which often claims responsibility for large-scale attacks targeting Shiite civilians in Iraq's capital.
The bombing came as US-backed Iraqi forces are in final stages of recapturing the northern town of Tal Afar from IS, about 150 kilometers (93 miles) from Syria's border.
Yesterday, Iraqi military said it had "fully liberated" Tal Afar's town center from IS militants. On Monday, the troops fought at the outskirts of al-Ayadia district, about 10 kilometers (6 miles) northwest of Tal Afar, where most of the militants fled.
Tal Afar was one of the few remaining towns in Iraq still in IS hands following the liberation of Mosul in July from the Islamic State group. The Sunni militant group still controls the northern town of Hawija, as well as Qaim, Rawa and Ana, in western Iraq near the Syrian border.
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