No group immediately claimed responsibility for the attack at the Allawi al-Hillah bus terminal but insurgents have been gaining ground over the past year in the western province of Anbar bordering Syria, where the militant group is also active.
On January 1, militants seized control of two cities in Anbar, raising the stakes in a confrontation with the government, which has vowed to eradicate al Qaeda in Iraq.
The Iraqi army has deployed tanks and artillery around one of those cities, Falluja, threatening to storm the town unless local tribesmen expel gunmen from the al Qaeda-affiliated Islamic State of Iraq and the Levant (ISIL).
Ramadi, the provincial capital, was retaken by the army with the help of tribes in the area.
Bloodshed in Iraq has returned to its highest level in five years, a surge of violence partly fuelled by the war that began in Syria some months before US forces ended their nine-year occupation of Iraq in 2011.