BAGHDAD - A car bomb tore through a market area in a mainly Shiite neighbourhood in Baghdad on Tuesday, killing 51 people and wounding dozens, officials said, the deadliest such attack in more than three months.

The attack occurred just before 6 p.m. as the market in the northwestern Hurriyah neighbourhood was packed with shoppers preparing for their evening meals.

Nobody claimed responsibility for the attack, but it bore the hallmarks of "al-Qaida in Iraq," which is known to use car bombs and suicide attacks.

A soft drink vendor who witnessed the blast, Kamil Jassim, said the car that exploded was parked near a two-storey building with shops on the bottom floor and apartments on top. He said a nearby generator caught on fire, partially collapsing the building and burning several other houses.

The casualty toll spiked to at least 51 people killed and 75 people wounded after rescue crews extinguished the blaze and found the bodies of dozens of victims who had been trapped inside or buried in the rubble, a police officer said, speaking on condition of anonymity because he wasn't authorized to release the information.

Most of those killed were burned to death or suffocated, he added.

The blast shattered the relative calm in the capital amid stepped up security measures. American commanders have consistently said they have "al-Qaida in Iraq" on the run but warned that the insurgents retain the ability to stage high-profile attacks.

Haider Fadhil, a 25-year-old metal worker, said he was shopping with his two friends when the force of the blast tossed him through the air and knocked him out.

"When I regained consciousness, I found that my left hand and leg were broken," he said from his hospital bed. "Thanks be to God for saving me and thanks to those who carried me in their pickup truck to the hospital."

Tuesday's attack was the deadliest car bombing since March 6, when a twin bombing killed 68 people in a crowded shopping district in the central Baghdad district of Karradah.

It occurred on the same day the Iraqi parliament announced it will start holding sessions outside the U.S.-protected Green Zone in the fall - the latest bid by Iraqi authorities to bolster public confidence in the security gains and assert their independence.

The 275-member legislative body currently meets in a heavily guarded convention centre inside the Green Zone, a sprawling maze of concrete barriers and checkpoints in central Baghdad.

Deputy Speaker Khalid al-Attiyah told legislators they will move to the Saddam Hussein-era parliament building for the next legislative term, which is due to begin Sept. 1.

The National Assembly building that was used by the Iraqi parliament under Saddam is in the Allawi district, about 500 metres away from the blast walls that form the perimeter of the Green Zone on the west side of the Tigris River.

It was looted and burned in the chaos that followed the fall of Baghdad to U.S. forces in April 2003. But al-Attiyah said its reconstruction has been completed.