Earlier, several roadside bombs and shootings killed at least a dozen people, mostly in Baghdad, and a US helicopter crashed in Ramadi in the west of the country where US forces are battling a Sunni Arab insurgency that shows no signs of abating.
With six weeks to go before the parliamentary elections that Washington hopes will set Iraq on the path to stability, the Iraqi government issued an appeal to former junior officers in Saddam Hussein's military who were sacked by the US occupiers after his fall to return to the army.
The car bomb in the mainly Shia town of Musayyib, south of Baghdad, came as people were preparing for the three-day Eid holiday.
The Interior Ministry said 23 people had been killed in the attack, which used a remotely detonated car bomb.
US commanders have warned of a rise in bloodshed in the run-up to the December 15 elections.
FORMER OFFICERS INVITED TO REJOIN ARMY In a statement issued here, Defence Minister Saadoun Dulaimi, one of the few Sunnis in the government, invited former officers with the ranks of major, captain and lieutenant to return to the army.
With the election looming, there may be a political as well as practical security motive behind the move. The loss of army pay has been a major source of discontent among Saddam's fellow minority Sunni Arabs, who dominated the officer corps.
Within weeks of Saddam's fall in April 2003, US Administrator Paul Bremer disbanded at a stroke Iraq's 400,000 strong armed forces and security agencies. US officials said it simply formalised the fact that the army had evaporated in the aftermath of the war, with soldiers deserting en masse.
Washington is racing to build up a new Iraqi army to let it bring home American troops who are pinned down in Iraq by insurgents displaying considerable military experience.
The plight of the hundreds of thousands of unemployed former soldiers has been a rallying point for Sunni Arab complaints that the ruling Shias and Kurds are neglecting their interests.
After most Sunnis boycotted an election in January, they seem likely to turn out in force at the December 15 ballot; US and Iraqi officials hope this engagement in the political process can undermine popular support for the insurgency.
But the violence continued to claim lives on Wednesday: two separate roadside bombs in Baghdad killed five Iraqi soldiers and five civilians; a policeman was shot elsewhere in Baghdad and another soldier killed by a bomb in Fallujah.
US forces have conducted a series of offensives in western Iraq to choke off what they say is a supply route for foreign fighters coming from Syria into Iraq to fuel the insurgency.
In the latest air strikes, the military said US-led coalition air forces had bombed three al Qaeda safe houses in the area of Husayba, which is near the Syrian border, and at least six insurgents had been reported killed.
Doctor Hazim el-Ani in Husayba said 15 Iraqis were killed and seven wounded in the air strikes, but the figures could not be independently verified.
US officers accuse local doctors of inflating casualty figures and describing dead guerrilla fighters as civilians.
Two US Marines were killed on Wednesday when their "Super Cobra" helicopter crashed in the area of Ramadi west of Baghdad, the US military said. The cause of the crash was under investigation.