"Most of the wounded were women and children, and the blast destroyed 15 vehicles and about 20 nearby shops," said Lieutenant Eid al-Shammari of the local police.

Doctor Mohammed Dhia, head surgeon at the Hilla hospital confirmed the casualties, adding that 25 of those wounded had serious injuries, including severe burns.

Medical officials earlier confirmed that bodies had been evacuated to two hospitals in the area.

The bombing in a mostly Shia town came hours before the US ambassador to Iraq and his Iranian counterpart met in a second round of face-to-face talks aimed at controlling Iraq's spiralling violence.

It was not immediately clear who was behind the bombing, but in the past such attacks have been blamed on Sunni insurgent groups such as al-Qaeda in Iraq, which is trying to overthrow Iraq's US-backed government and foment unrest.

Meanwhile, four American soldiers were killed in Iraq at the weekend in separate attacks across the war-torn country, most involving roadside bomb blasts, the US military said on Monday.

One was killed when insurgents detonated a bomb near his vehicle in Baghdad on Saturday, while the other died of wounds sustained in a blast on Sunday.

A third soldier was killed on Friday when a roadside bomb struck his Humvee south of the city of Samarra, in a Sunni region north of the capital that sees frequent insurgent attacks.

And in the western Anbar province a marine was killed in combat operations on Saturday, the military said in a statement released on Monday.

The latest fatalities took the US military's losses in Iraq since the March 2003 invasion to 3,633, according to an AFP count based on Pentagon figures.

The attack came a day after at least 16 people died when four car bombs rocked the center of the capital. Three of the blasts took place in one 30-minute span.

Police, morgue and hospital officials reported a total of at least 59 people killed or found dead nationwide Monday.

The continued fighting and deaths of Iraqis and American forces in the sixth month of the American bid to calm Baghdad and the center of the country illuminate the stubborn resistance to a political solution in Iraq.

The government and legislature are under heavy US pressure to overcome sectarian differences and agree to measures aimed at promoting national unity as Americans are engaged in a fierce debate over calls to bring US troops home from the unpopular war.

Hundreds of demonstrators, meanwhile, marched in the predominantly Shia district of Shaab in northern Baghdad to protest a US-Iraqi barricade of Husseiniyah, a town on the capital's northeastern outskirts that is known as a Shia militia stronghold. Police issued calls for residents to leave the town, and some said they were running out of food and fuel.

The Shia-dominated parliament has said al-Maliki should intervene to end the crackdown by US and Iraqi forces on Husseiniyah. The town is dominated by the Mahdi Army, the militia loyal to radical cleric Muqtada al-Sadr, and straddles the highway to Baqouba, where US forces are in the second month of a drive to cleanse that region of al-Qaeda in Iraq.

State-run Iraqiya television said the Husseiniyah blockade "would have serious consequences on people's lives there."

A 51-year-old woman resident, who would give her name only as Um Bassem, said police, apparently expecting a major outbreak of fighting, had issued calls for residents to leave Husseiniyah if they could.

"My husband offered to take us out and return to protect our house and belongings, but we refused to leave because we would be so worried about him," Um Bassem told an AP reporter in the area. She said food stocks were becoming low.

"We decided to stay home in two rooms at the back of the house. We can't leave because we have valuable things and we fear looters," she said.

Lt Col Michael Donnelly, spokesman for US forces north of Baghdad, said American and Iraqi forces were now allowing "commercial vendors to bring food to the south of Husseiniyah. Civilians are authorised to walk to these vendors to buy food. Donkey carts may be used, but no vehicle movement is authorised. We are also allowing civilians that need medical aid, to walk to the Hamid Shaub Hospital for free treatment."

Trouble broke out in Husseiniyah when US forces took small arms fire shortly before midnight Friday and ordered an airstrike on the building from which the gunmen were shooting. The military said helicopters fired missiles at the building and three gunmen fled to a second building.