An explosives-packed Car bomber suicide killed at least 32 people and injured about 60 in a predominantly Shia Muslim district of the Iraqi capital Baghdad.
A security official told Reuters the bomber had initially attempted to attack a police station.
Attacks in Iraq have risen since US troops left last month, with 16 people killed in attacks on Thursday.
Police officials said the blast occurred at 11:00 a.m. in the predominantly Shiite neighborhood of Zafaraniyah, where mourners had gathered for the funeral of a person killed the day before. They said 65 people were wounded in the attack, including 16 policemen.
Hospital officials confirmed the death toll.
Across Iraq, at least 200 people have been killed in a wave of attacks by suspected insurgents since the beginning of the year, raising concerns that the surge in violence and an escalating political crisis might deteriorate into a civil war.
The blast occurred as mourners passed by an outdoor market headed toward a hospital in Baghdad's Zafarniya district to recover the bodies of three relatives shot the night before in the western part of the city, the officials said.
The violence has raised concerns about the ability of Iraqi security forces to ensure order, particularly after the United States withdrew troops at the end of 2011.
The situation has been further inflamed with a political bloc loyal to radical, anti-American Shiite cleric Muqtada al-Sadr calling for the dissolution of parliament and early elections.
Friday's blast is the second deadliest single attack in Iraq this month.
The last U.S. soldiers left the country Dec. 18.