In the capital, where insurgent attacks continue nearly daily, a car bomber targeted a government minister's convoy, killing at least 13 people.
Babil is the 12th of 18 Iraqi provinces to be handed over and a sign of the improving security. U.S. forces will remain in the area to assist the Iraqis when needed.
At a transfer ceremony held near the ruins of the ancient city of Babylon, Lt. Gen. Lloyd Austin, the No. 2 U.S. commander in Iraq, said security gains have been remarkable - with the number of attacks falling about 80 percent from an average of 20 per week a year ago.
But he cautioned that "while the enemies of Iraq are down, they are not necessarily defeated."
With Babil's handover to the Iraqi government, the only province left under U.S. control in southern Iraq is Wasit, a rural desert region that borders Iran and has been a conduit for the smuggling of foreign fighters and weapons into Iraq.
Other provinces that remain to be handed over are north of the capital, where violence has been slower to decline after insurgents fled security crackdowns in Baghdad and surrounding areas.
Salim al-Musilmawi, Babil's provincial governor, credited tribal leaders and Sunnis who turned against al Qaeda in Iraq in a U.S.-funded revolt with the downturn in violence.
"Today's security handover is the fruit of the victory over al Qaeda," he said.
In Baghdad, the attacker rammed the car into the Labor and Social Affairs Ministry convoy as it passed through the central Bab al-Sharji area, a ministry spokesman said.
The Shiite minister, Mahmoud Mohammed al-Radhi, escaped unharmed but three of his guards were killed, spokesman Abdullah al-Lami told al-Arabiya TV station.
"It is the latest in a series of criminal acts that are targeting development process in Iraq," al-Lami said.
At least 10 civilians were killed in addition to the guards, and 21 people were wounded, according to police and hospital officials, who spoke on condition of anonymity because they weren't authorized to release the information.
Smoke and the smell of gunpowder filled the air. Drivers at a nearby intersection sought shelter behind their cars until Iraqi security forces ordered them to evacuate the area.
AP Television News video showed a burned SUV and the charred hulk of the apparent car bomb surrounded by Iraqi security forces. The windows of a nearby camera store were shattered, with torn pictures left among the glass.
Youssef Qassim, the 40-year-old owner of a nearby clothing store, said he peered through a hole in the concrete wall surrounding the market and saw at least two cars on fire with burning bodies inside.
"The guards of the government convoy opened fire into the air but stopped when U.S. forces arrived at the scene," he said.
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