Mourners had gathered in the city of Tal Afar, 150 kilometres east of the Syrian border, for the funeral of Sayed Talib Sayed Wahab, an official of the Kurdish Democratic Party (KDP), who was gunned down by insurgents on Saturday in nearby Mosul.
A car ploughed into a funeral tent full of mourners and exploded.
The exact number of those killed could not be confirmed but was believed to be 25, with at least 30 others injured.
The attack came as insurgents intensified their campaign, with more than 100 Iraqis and 11 American soldiers killed since Thursday.
Khisru Goran, the deputy provincial governor and a spokesman for the Kurdish Democratic Party, said a suicide attacker detonated the explosion, but the US military did not confirm it was a suicide attack.
US troops, Iraqi police and ambulances raced to the scene to take the wounded to a local hospital, but unidentified gunmen blocked the road and fighting broke out, Mr Goran said.
“Tal Afar has become a pocket for insurgents, and we know that more than 500 terrorists are hiding there” he said.
Tal Afar, 80 kilometres west of Mosul, is an insurgent hotbed which Iraqi and US forces have repeatedly raided in recent months.
The area is ethnically mixed and although it lies south of the autonomous Kurdish region, the two main Kurdish parties — the KDP and the Patriotic Union of Kurdistan — have extended their influence there since the fall of Saddam Hussein’s regime.
Elsewhere in the war-torn country, another car bomb, targeting a US military convoy, killed five Iraqi civilians, including a young girl, in southeast Baghdad.
West of Baghdad a second car bomb attack killed at least three US soldiers.
Five Iraqi police were also killed when a group of around 30 insurgents stormed a checkpoint on the southern edge of the capital.
Iraqi leaders had hoped the announcement of a partial cabinet line-up last week would undermine the insurgency.
But more than 500 Iraqis were killed in violence in April, up more than 50 percent from the previous month.