At least 16 people have been killed and 35 others wounded in a car bomb at a crowded market in Baghdad, police say.

At least four children and three women were among the casualties from the blast next to a bus terminal in the mostly Shia district of Shaab, officials said on Thursday.

The explosion came a day after a US military spokesman said attacks across the country had dropped to their lowest levels since the months following the 2003 invasion that toppled Saddam Hussein, the former president.

"Attacks are at their lowest since August 2003," Major General David Perkins told reporters in Baghdad on Wednesday, saying incidents were down 90 per cent from June 2007.

"There were 1,250 attacks a week at the height of the violence; now sometimes there are less than 100 a week," he said.

The Shaab car bomb attack came three days after a suicide attack against Kurdish mourners in central Iraq, which killed 27 people and wounded 50 others.

On Monday, a bomb at a bus terminal in west Baghdad's Abu Ghraib district killed nine people and wounded 23, Iraqi police said.