The bomb went off in a market place as a funeral procession was passing in the city's Zafaraniya district.
A security official told Reuters the bomber had initially attempted to attack a police station.
Attacks in Iraq have risen since US troops left last month, with 16 people killed in attacks on Thursday.
'Taxi bomber'
The suicide attacker struck as mourners escorted by police cars were transporting the body of a man shot a day earlier for burial, police said.
"It was a huge explosion,'' Salam Hussein, a 42-year-old grocery store owner, was quoted as saying by the Associated Press news agency.
Continue reading the main story
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Start Quote
The funeral corpses went flying into the air”
Ayman Rabiyah
Eyewitness
One of Mr Hussein's employees was hurt and, as he took him to hospital, he saw cars engulfed in flames.
Where the bomber's car had exploded, he saw "human flesh scattered around and several mutilated bodies in a pool of blood''.
A policeman at the scene, uninjured but covered in dust from the blast, told AFP: "The suicide bomber targeted the funeral procession.
"They were following a tradition that you carry the bodies of the dead from the hospital for a short while before transporting them in a car.
"At that moment, the suicide bomber attacked."
Ayman Rabiyah, an employee of the Baghdad municipality, said: "I saw a yellow taxi going in the direction of the funeral procession, and then it exploded.
"The funeral corpses went flying into the air. I carried the dead body of a young girl, and the corpse of a man whose head had been blown off, to the hospital."
Helicopters hovered as security forces cordoned off the site of the explosion, while distraught witnesses screamed in anguish, AFP reports.
Outside the hospital, groups of men called out names, searching for missing relatives.
Inside, people crowded around medics to ask about their loved ones.
One nurse quoted by AFP said simply: "I cannot tell you anything - there are only arms and legs, we do not know who they belong to."
Thirteen people were also killed in bomb attacks on Thursday.
Two brothers - both policemen - and at least eight of their relatives were reported to have been killed after insurgents bombed a house in Musayyib in the south of Baghdad.
Three people were also killed in Kirkuk in a separate bomb attack.
Are you in Zafaraniya? Were you taking part in the funeral procession? Send us your comments below.
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