It appeared to be the deadliest attack in Iraq in nearly six months.
Kirkuk, the center of Iraq's northern oil fields, has seen fewer attacks than other regions such as Baghdad but remains the focus of years of competition and political wrangling among ethnic groups with rival claims to the city.
Police Brig. Gen. Sarhad Qadir, who gave the casualty figures, said the blast occurred in the Abdullah Restaurant just north of the contested oil city. He said 120 people were wounded and that the dead included five women and three children.
A Kurdish official said Arab tribal leaders were having lunch with members of the Patriotic Union of Kurdistan, the party of President Jalal Talabani.
They were to attend a meeting with Talabani after the lunch to discuss ways to defuse tensions among Arabs, Kurds and Turkomen in the Kirkuk area.
The restaurant was also packed with families celebrating the final day of the Eid al-Adha religious holiday. It is affiliated with another Kirkuk restaurant of the same name, which was attacked by a car bomb in 2007 that killed six people and wounded 25.
A guard at the entrance said the blast occurred moments after a man parked his car and walked inside. The man was not searched because the guards had not been told to frisk customers, he said. The guard spoke on condition of anonymity because of fears for his own safety.
Salam Abdullah, a 45-year-old Kurd, said he was having lunch with his wife when they saw shrapnel flying through the room.
"I held my wife and led her outside the place. As we were leaving, I saw dead bodies soaked with blood and huge destruction," he said. "We waited outside the restaurant for some minutes. Then an ambulance took us to the hospital."
Abdullah was hit in his head and left hand while his wife was wounded in her head and chest.
Awad al-Jubouri, 53, one of the tribal leaders at the luncheon, said he heard a huge explosion "and I felt that my chest was bleeding."
"I do not know how a group like al Qaeda claiming to be Islamic plans to attack and kill people on sacred days like Eid," he said. "We were only meeting to discuss our problems with the Kurds and trying to impose peace among Muslims in Kirkuk."
The Kurds want to annex Kirkuk and surrounding Tamim province into their self-ruled region in northern Iraq. Most Turkomen and Arabs want the province to remain under central government control, fearing the Kurds would discriminate against them.
Iraq's parliament exempted the Kirkuk area from next month's provincial elections because the different ethnic groups could not agree on how to share power there.
Iraq's constitution provides for a referendum to be held in Kirkuk to determine whether it would be annexed to the Kurdish regional administration. But the vote has been repeatedly postponed because of fears that the balloting would worsen ethnic tension.
Elsewhere, the U.S. military said Thursday that American troops launched raids in at least four Iraqi cities, detaining six people believed to be associated with al Qaeda in Iraq.
A U.S. statement said two men were detained Wednesday in a pair of raids near Tarmiyah, 30 miles north of Baghdad.
Two others were captured Thursday in Ramadi, capital of Anbar province west of Baghdad, the statement said. The two others were arrested Thursday - one in Mosul and the other in Baghdad, the U.S. said.
U.S. troops have broad authority under a U.N. mandate to apprehend people deemed a security threat and hold them indefinitely without charge.
However, the mandate expires at the end of this month and will be replaced by a U.S.-Iraqi security agreement that requires the U.S. to obtain warrants to search houses or detain people except in active combat.
The new regulations will be part of a series of major changes in the five-year U.S.-led mission.
Britain announced Wednesday it will withdraw all but a handful of its 4,000 soldiers from Iraq next year. The U.S. is expected to shift a brigade to Basra in southern Iraq, where most of the British forces are located, to ensure the security of supply lines into the country from Kuwait.
U.S. President-elect Barack Obama has called for withdrawing all U.S. combat troops from Iraq by early 2010, shifting responsibility to the Iraqis for the defense of the country against Sunni and Shiite extremists.