Dozens of people have been killed in Baghdad when a terrorist bombing rocked a popular market on Thursday, in one of the deadliest single attacks in the city in months.

Dozens of people have been killed in Baghdad when a terrorist bombing rocked a popular market on Thursday, in one of the deadliest single attacks in the city in months.

The blast, which killed 77 people, came after the outgoing US army chief warned that reconciliation in Iraq is becoming increasingly difficult and that the country may ultimately have to be partitioned.

The bomb went off in a wholesale vegetable market in the Sadr City area of north Baghdad at around 6:00 am (0:00 GMT), peak time for shops buying vegetables for the day.

At least 200 people were also wounded.

The bombing devastated the market, killing horses used to transport vegetables, burning vehicles and leaving produce strewn in the street.

The so-called 'Islamic State of Iraq and the Levant' (ISIL) takfiri group claimed responsibility for what it termed the "blessed operation" in a statement posted online.

Bombings such as the Sadr City attack are a significant source of tension in Iraq and have worsened the country's sectarian divide.

The Baghdad blast came two days after bombings in Diyala province, northeast of the capital, killed more than 30 people.

A massive suicide attack in the province killed more than 120 last month, one of the deadliest single bombings in Iraq since the 2003 US-led invasion.