The bombing occurred in Sadr City, the largely Shiite populous swath of eastern Baghdad that has been the scene of carnage during the Iraq war.
A motorcycle pushing a cart rigged with explosives and loaded with vegetables exploded in the Mredi market, the official said. Women and children were among the casualties, according to the official.
Iraqi President Jalal Talabani condemned the attack and said the perpetrators of "this heinous crime" were trying to destabilize security six days before a looming deadline for the U.S. military to withdraw.
Under a U.S.-Iraqi security agreement that went into effect at the beginning of this year, all U.S. combat troops must pull out of Iraqi cities, towns and localities, and move into bases by the end of this month.
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Wave of bombings kill at least 22 in Baghdad
"This cowardly act will not succeed in destabilizing the determination of our people and armed forces to move forward on taking over the security responsibilities and foil the plans of terrorists," Talabani said in a statement.
There had been talk of combat troops remaining in some cities, including Mosul, but the U.S. military said that would be an Iraqi decision.
In other attacks in the Iraqi capital Wednesday, one person was killed and 10 wounded in the Jihad neighborhood, a Sunni community in western Baghdad, when a bomb hidden in a plastic bag exploded outside a coffee shop.
Also, four people were wounded in a roadside bomb in Saadiya neighborhood in southwestern Baghdad.
Wednesday's attacks follow a massive strike last Saturday when a suicide truck bomb near Kirkuk in northern Iraq killed 80 people and wounded more than 210. It occurred in Taza, a predominantly Shiite Turkmen town.
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