The explosion occurred in the town of Baiji, home to Iraq's biggest oil refinery, 180 km north of Baghdad, the sources said.
A source in the Salahuddin operations command said the bomb had been attached to a vegetable cart belonging to a police officer who worked at the market when he was off duty.
Tensions within Iraq's fragile coalition government of Sunnis, Shiites and Kurds have been mounting since US troops withdrew in December, raising fears of a return to the bloody sectarian violence that almost drove the country to the brink of civil war a few years ago.
Earlier yesterday, two police officers were killed when a roadside bomb targeting their patrol blew up on the outskirts of Ramadi in the Sunni heartland Anbar province, police said.
In Mosul in the north, two gunmen were killed after exchanging fire with Iraqi army forces, while one civilian was seriously wounded in a separate incident in Mosul when armed men opened fire in front of his house, police sources said.
Bombings and killings remain a daily occurrence in Iraq though overall levels of violence have dropped from the height of sectarian fighting in 2006-7.
On Friday, seven Shiites were killed by armed men while bombings targeting Shiite families killed five people on Wednesday.
