A motorcycle bomb has killed seven people and wounded 45 others in a crowded motorbike market in Sadr City, an Iraqi Interior Ministry source said.
The bomb, detonated by remote control, targeted shoppers in the Mureydi market.
The source, quoting police at the scene, said officers initially thought the explosion was caused by a rigged car but later determined the explosives had been planted on a motorcycle.
The densely populated and impoverished area is often targeted by Sunni militants.
On Tuesday, Iraqi Prime Minister Nuri al-Maliki demanded the US and Iraqi military lift a blockade of the district that was enforced after a US soldier of Iraqi descent was suspected to have been kidnapped by a powerful militia.
The militia controls many parts of the slum, which is home to a third of Baghdad's population.
