The car bomb ripped through a market located in Baghdad's western Kadhimiyah neighourhood at 7.45pm (0145 AEST Friday), killing 15 and wounding 22.
The blast was the latest in a string of attacks that have shaken central Iraq, where feuds among the country's Shi'ite majority and its one time Sunni elite have resulted in bloodshed since the fall of dictator Saddam Hussein in 2003.
In another provocative attack, the brother of prominent Sunni Arab politician Tareq al-Hashemi and his companion were killed in a drive-by shooting in central Baghdad.
Mr Hashemi's party is the leading member of the Sunni National Concord Front coalition, which holds 44 seats in parliament.
Families flee violence
An Iraqi government official said that about 10,000 families had fled the Iraqi capital itself amid rising sectarian violence.
"We estimate that 10,000 families have been displaced and this number will increase," the official told AFP, on condition of anonymity.
"Just for Baghdad, the number of families has reached 3,991," he said, adding that the displaced tend to come from mixed Sunni-Shi'ite neighbourhoods.
At the end of March, authorities estimated that 4,000 to 5,000 families had been displaced across Iraq, but the figure has doubled amid the current battle between Sunni insurgents and armed Shi'ite groups.
Shi'ites regularly blamed Sunnis for car bombings and suicide attacks, while the minority Sunni community often points the finger at the country's Shi'ite-led government for sending out death squads to target them.
Sunni politician Saleh Mutlak, whose coalition holds 11 parliament seats, accused government-linked death squads of killing 68 people who had been detained from Baghdad's Al-Dura neighbourhood on April 4.
Iraq's Shi'ite Interior Minister Bayan Jabr Solagh has acknowledged the existence of so-called death squads within certain security forces but denied any link with his own ministry.
Meanwhile, the impasse over Ibrahim Jaafari's candidacy for prime minister was no closer to a resolution today as Shi'ite leaders cancelled a meeting scheduled for scheduled for Friday aimed at negotiating his fate.
Patrols increased
The US and Iraqi forces have nearly doubled patrols in Baghdad over the last two months in order to assert control over the increasingly chaotic situation.
From an average of 12,000 patrols in February in Baghdad, the US and Iraqi forces have raised the patrols to 20,000 "a jump of 45 per cent," said US military spokesman Major General Rick Lynch.
Maj Gen Lynch also noted that there had been a spike in violence against the US forces in the past few weeks across Iraq.