A woman detonated her explosive belt in a market east of the Shi'ite holy city of Kerbala on Friday, killing at least 30 and wounding 35, Iraqi security sources said.
Islamic State claimed the attack in the town of Musayab, south of Baghdad, in a statement on its Amaq news agency. It didn't the bomber.
A security officer said the assailant was a woman who hid the bomb under the customary full-body veil.
The attack comes as Islamic State is about to lose Mosul, the de-facto capital of the hardline Sunni Muslim group in Iraq, to a U.S.-backed Iraqi offensive launched in October.
The group is also on the backfoot in neighboring Syria, retreating in the face of a U.S.-backed Kurdish-led coalition attacking its capital there, Raqqa,.
Iranian-backed paramilitaries are taking part in the campaign fighting Islamic State in Iraq, attacking the group in the border region near Syria.
Islamic State declared a self-styled "caliphate" over parts of Syria and Iraq three years ago.