Twenty-five people, including two American soldiers, were injured in the blast. The bomb, hidden inside an orange-and-white Baghdad taxi, exploded outside a three-foot-high concrete blast wall that protects a U.S. checkpoint.
"There was a long line of cars. Fortunately, the blast barriers worked in this case," said Col. John Murray of the U.S. Army's Texas-based 1st Cavalry Division.
A suicide bomber also died in the attack, the military said. Hours later, a roadside bomb in Baghdad injured two Iraqis.
Also Thursday, the U.S. command said that two U.S. soldiers were killed and two were wounded when a roadside bomb exploded in Baghdad. A total of 761 U.S. service members have died since President Bush launched the invasion of Iraq in March 2003.
U.S. soldiers backed by tanks and armored fighting vehicles seized control of the governor's office from Shiite militiamen in the holy city of Najaf. Heavy shooting could be heard and plumes of smoke rose over the city.
In other developments:
The car bomb incinerated three vehicles, reducing them to hulks of twisted, charred metal. Another five cars were badly damaged, some turned on their side from the force of the blast.
The explosion was so strong that it hurled the engine of the car carrying the bomb some 15 feet from the site of the blast.
The U.S. soldier who died was the 21st U.S. serviceman killed in Iraq in May. The injured included two U.S. soldiers and three Iraqi policemen, the U.S. military said.
Shattered glass from nearby shops littered the area. A column of thick black smoke rose from the blast site and drifted across Baghdad. Residents living in homes as far as 100 yards away from the blast reported shattered widows and doors becoming unhinged.
On Jan. 17, a suicide truck bombing at a Green Zone gate in central Baghdad killed 24 people and wounded about 120. Three U.S. civilians and three U.S. soldiers were among the injured in the bombing.
Blast walls and dirt-filled baskets were erected at that gate and other checkpoints in the Iraqi capital following the January blast. Murray said U.S. military checkpoints for car and pedestrian traffic remain "security worries."
The suicide attack came as U.S.-led forces launched their biggest assaults yet against militiamen loyal to radical Shiite cleric Muqtada al-Sadr. At least 15 Iraqis and a U.S. soldier were killed in Thursday fighting. In later overnight clashes, another 11 militiamen were killed, the U.S. military said.
Moderate Shiites tried to persuade al-Sadr to back away from his confrontation with the United States — a reflection of their growing concern.
Heavy fighting against al-Sadr's militia came in the holy city of Karbala, where coalition forces raided a hotel, the local former Baath Party headquarters and the regional governor's office, where al-Sadr fighters had been stockpiling weapons, Brig. Gen. Mark Kimmitt said.
Troops came under fire in the overnight raid on the governor's office, Kimmitt said in Baghdad. He said 10 al-Sadr followers were killed. The U.S. soldier died when a dump truck tried to ram a checkpoint in Karbala, the military said.
Outside the city of Kufa, U.S. forces attacked a van where Iraqis were seen unloading weapons. The vehicle was destroyed and five Iraqis were killed, Kimmitt said.
In overnight fighting in Karbala, one militiaman was killed, a senior U.S. officer said, speaking on condition of anonymity.
In Baghdad's Sadr city, an overwhelmingly Shiite Muslim enclave, militiamen ambushed four U.S. patrols. Ten attackers were killed in retaliatory gunfire, the U.S. officer said. There were no reports of U.S. casualties.
In Najaf, U.S. troops battled al-Mahdi Army fighters outside a cemetery near the Imam Ali Shrine, Iraq's holiest Shiite site.
Iraqi Governing Council member Mohammed Bahr al-Ulloum delivered a message to al-Sadr from a group of influential Shiites calling on his militia to disarm and leave Najaf, council member Raja Habib Al-Khuzaai told The Associated Press.