The explosion took place in the mainly Shia Muslim neighbourhood of Hurriya.

The bomb appeared to have been timed to go off during the early evening rush hour, when the bus stop was crowded with waiting passengers.

It is the deadliest bombing in Iraq's capital for weeks, following a security drive by Iraqi and US forces.

Wednesday's blast set fire to about 20 shops and razed a multi-storey building, security officials told Reuters news agency.

Reversible security

The BBC's Nicholas Witchell in Baghdad says the explosion is a sharp reminder of the fragility of recent security improvements.

The number of attacks by insurgents and sectarian factions has dropped significantly in the city, although sporadic shootings and bombings have continued.

Some 500 Iraqis were killed last month, compared with more than 1,000 in April.

And the toll of American soldiers killed in May - at 19 - was the lowest monthly figure since the conflict began.

The US military, which led an invasion to overthrew Saddam Hussein's government five years ago, has repeatedly warned that security improvements are reversible.

Iraqi Prime Minister Nouri Maliki has meanwhile ordered a crackdown on Shia militias in Baghdad and Basra and Sunni Arab insurgents in the north.

BBC