The explosion rocked the Bab al-Mudham area, a busy part of the city, on a street with many shops and lined with minibuses waiting for passengers, police said.
At least six civilians were killed and 18 wounded, police said. Medical sources confirmed the toll.
Iraq's intelligence service announced in mid-March it had arrested 31 suspected members of the Islamic State militant group who were part of a cell responsible for 52 bomb attacks in 2014 and 2015.
Some attacks have been carried out in recent weeks in Baghdad, which at one point last year used to be rocked by car bombs almost every day, but their number has dropped this year.
The years-old nightly curfew on Baghdad was lifted last month.