Leaving behind scenes of carnage and chaos, the blast ripped through a cement wall, destroying several cars along a security lane about 10 metres from the main entrance to the heavily guarded compound.
The blast that punched a two-metre-wide crater in the road also wounded 40 people, according to the interior ministry.
"This is a naked aggression against the Iraqi people," fumed interim Prime Minister Iyad Allawi as he inspected the site just two hours after the suicide attacker struck at about 9:15 am (0515 GMT).
Bloodied bodies were whisked off in screaming ambulances, with many of the wounded shouting in anger, blaming the United States for the latest bloodshed.
Witness Alaa Hassan wandered the street in a daze. With a piece of shrapnel still in his hand, he recounted the ordeal.
"Two cars pulled up. One of them was a black car that drove away. The other one, a white car, exploded, I dropped to the ground. When I regained consciousness, I saw so many injured," he said.
The area is typically crammed with cars and people moving in and out of the so-called Green Zone, but Wednesday was a national holiday so the volume of traffic, while heavy, was not as intense as normal, a government official said.
The attack killed three Iraqi National Guards and seven civilians, according to interior ministry figures. It was not clear if the toll included the suicide bomber.
US Colonel Mike Murray said the bomber's vehicle, identified later by a senior Iraqi police officer as a truck, detonated in the search lane before it had been checked.
At Yarmuk hospital, stretchers lined the hallway, with six young men oozing pus and blood as relatives raged at the latest atrocity to hit Baghdad in the 15-month-old insurgency.
Allawi said he thought the attack was in reaction to arrests made on Monday in Baghdad by police who snared more than 525 suspected outlaws in the largest co-ordinated Iraqi operation since the US-led invasion of March 2003.
While in Mosul on Wednesday, attackers killed the Governor of the city, Osama Kashmoula, as he was driving in a convoy of vehicles towards Baghdad, an Interior Ministry source said.
The assailants threw a grenade at the governor's vehicle and fired with automatic weapons, the source said.
"He was on his way to Baghdad with a security escort of four cars, when the attackers in another car pulled up beside his vehicle and threw a grenade, and then shot at his car," said the source, declining to be named.
Meanwhile, unknown gunmen have shot dead a senior official from Iraqi's industry ministry as he left his home in Baghdad to go to work, a spokesman for the ministry of interior said on Wednesday.
The attack on Sabir Karim, a director general at the ministry, took place on Tuesday morning, said Colonel Adnan Abdul Rehman, noting that the assailants then fled the scene.
Several senior officials working for the interim Iraqi government, which took power from the US-led coalition barely two weeks ago, have been assassinated in recent weeks.
Meanwhile, five Iraqis were killed and another 21 wounded in clashes between insurgents and US marines in the flashpoint western Iraqi city of Ramadi, hospital and police sources said.
"Clashes at the northern entrance to the city during the afternoon left five dead and 21 wounded," according to a doctor at the hospital in Ramadi, 100 kilometres west of Baghdad.
Police Major Ahmed Rabiyeh confirmed the report, saying the clashed occurred in an industrial zone.
He would not give any details on the identities of the casualties.
Earlier, witness Mohammed Mahmoud said a convoy of around 10 US military vehicles was moving on Al-Karraj Street at the entrance to the city when attackers open fired with klashnikov assault rifles and rocket-propelled grenades.
The US military would not comment on the situation.
Ramadi, patrolled by US marines and army, is considered a bastion of the insurgency, along with Fallujah just to the east.
Separately, a police source in Ramadi said US soldiers had arrested the local representative of the anti-coalition Rally for National Unity, a party formed after the fall of dictator Saddam Hussein last year, and seized weapons during a search of the party's offices there.