At least six of those killed were policemen.
The blast – claimed by the group of Iraq’s most wanted rebel Abu Musab al-Zarqawi – injured 36 people.
The bomb went off around lunch-time just a few hundred metres from where Iraq’s parliament was meeting inside the fortified Green Zone, once Saddam Hussein’s presidential palace compound.
Zarqawi and his Iraqi Sunni Arab allies have declared war on the new Shi’ite-led, US-backed government.
Not for more than a month, since US and Iraqi forces launched Operation Lightning, a crackdown on insurgent bomb factories and other rebel activity in the city, has an attack caused so much bloodshed in central Baghdad.
“Ibn Zanbour,” or “Son of the Wasp,” was a lively and popular spot for police and others on a strip of grill and kebab establishments along a shaded sidewalk.
It lies within an outer cordon of police checkpoints set up after a series of car bombings of entrances to the Green Zone six months ago.
Meanwhile outside Baghdad, a suicide car bomber blew up his vehicle among a crowd of traffic police recruits in the northern Kurdish city of Abril, killing at least 10 and wounding more than 100.
A spokesman for Abril’s city council said the death toll could rise as many of the wounded were in a serious condition.
Saman Halabjayi, a spokesman for the Abril Ministry of Health said 106 were wounded, 10 of them seriously.
An Iraqi police witness said the bomber raced a red Toyota vehicle from a nearby building site onto a soccer field where more than 200 recruits had gathered early in the morning for training.
Security forces opened fire on the car, but could not stop and it headed toward the crowd exploding among them.