The blast tore through a book market just before noon and sent a plume of black smoke over the city, police said.
In and around the capital, Shiite pilgrims came under four separate attacks by gunmen, who killed at least six people and wounded 14 others. Thousands of Shiites are making their way to the southern city of Karbala for Saturday's observation of Arbayeen. The event concludes the 40 days of mourning of the slaying of Imam Hussein, whom Shiites believe to be the successor to the Prophet Mohammed.
On Sunday, more than 1,000 Iraqi and U.S. troops began a security sweep of the sprawling Baghdad slum of about 1 million Shiites. While the area is known to be the base of the Mehdi militant group, the U.S. military said in a statement no resistance was encountered in the door-to-door searches.