Iraq begins three days of national mourning on Monday for almost more than 200 people martyred by a suicide bombing in a busy Baghdad shopping district claimed by Takfiri ISIL group.

Iraq begins three days of national mourning on Monday for almost more than 200 people martyred by a suicide bombing in a busy Baghdad shopping district claimed by Takfiri ISIL group, the deadliest attack in the capital this year.

The blast hit the Karrada district early Sunday as the area was packed with shoppers ahead of this week's holiday marking the end of the Muslim fasting month of Ramadan.

Prime Minister Haider al-Abadi announced three days of national mourning for the victims as he visited the site of the attack, and his office said he had vowed to "punish" the perpetrators.

He also ordered changes to Baghdad security measures in response to the bombing, which security officials said killed 213 people and wounded more than 180.

The attack came a week after Iraqi security forces recaptured Fallujah from the  ISIL, leaving Mosul as the only Iraqi city under the jihadist group's control.

The blast set buildings ablaze, and crowds of people watched from the rubble-filled street as emergency personnel carried out victims and worked on the site.

A member of the civil defense forces said it would take "a number of days" to recover the bodies of the victims.

ISIL issued a statement claiming responsibility for the suicide bombing, saying it was carried out by an Iraqi as part of "ongoing security operations".

UN Iraq envoy Jan Kubis condemned the "cowardly and heinous act of unparalleled proportions," calling on authorities to bring those responsible to justice.

Officials said another explosion in the Shaab area of northern Baghdad killed at least one person and wounded four on Sunday, but the cause of the blast was disputed.