"I was standing in the queue when I saw this Mitsubishi coming slowly towards us," Ameer Hassan, one of the recruits, told Reuters at a nearby clinic. "Then it blew up in a huge fireball. When I opened my eyes again, I was in hospital."
Reuters television footage showed a pile of bloodied bodies outside the building. Smoke rose from the wreckage of burnt-out market stalls as bystanders loaded mangled corpses on to rickety wooden carts, usually used to carry fruit and vegetables.
Others, their limbs ripped to shreds, were piled into the back of pick-up trucks. Nearby buildings were pockmarked by shrapnel.
An official in Hilla's health directorate told Reuters the latest death toll was 125. Coalition forces confirmed at least 110 dead. No one claimed responsibility for the attack.
The official said existing patients had been moved out of hospitals to make way for victims. More than 30 doctors came from nearby towns to help treat the wounded and the Iraqi Red Crescent Society sent emergency aid and medics from Baghdad.
The toll is the highest from a single attack since the fall of Saddam in April 2003, and makes Monday one of the bloodiest days of the two-year insurgency.
The carnage came as Interim Prime Minister Iyad Allawi acknowledged Iraq's security forces were still unable to take on the insurgency without the help of US-led troops.
"Iraqis should be able to start taking over more and more security responsibilities very soon," he wrote in the Wall Street Journal. "But we will continue to need and to seek assistance for some time to come."
Elsewhere in Iraq, another suicide car bomber blew up his vehicle in the town of Musayyib, just 30 km from Hilla, but succeeded only in killing himself.
A hospital official said one civilian was killed and two were wounded when insurgents fought with Iraqi troops in the town of Baquba, north-east of Baghdad.
Two policemen were killed in the capital, one by a gunman and one by a roadside bomb, police sources and witnesses said.
The US military said one of its soldiers was shot and killed in Baghdad while manning a traffic checkpoint.
Government sources gave details on Monday about the capture of Saddam Hussein's half-brother, Sabawi Ibrahim, a top-level Baathist accused of directing the Iraqi insurgency from Syria.
They said he was seized by Syrian Kurds in north-east Syria and handed to Iraqi Kurds before being taken into custody by Iraq's forces. Since Syrian Kurds are tightly watched by Damascus, they may have received a green light for the seizure.
Iraq's US-backed government has repeatedly accused Syria of abetting insurgents, charges Syria denies. Syrian authorities in Damascus had no comment on their possible involvement in Ibrahim's capture. The US military also would not comment.