Two foreign men in the car were killed.
At least two more explosions were heard later Monday in central Baghdad. Their causes were unknown, but smoke rose in the vicinity of coalition headquarters.
The explosion underscored the security problems confronting coalition forces and Iraqi leaders as the June 30 deadline for the handover of limited sovereignty approaches.
President Bush was to address the nation Monday on those handover plans, and the United Nations was due to take up a resolution outlining some details of the interim government.
After Monday's explosion, American soldiers tried to pull the men from the shattered car, and quickly sealed off the area, said witness Kamel Raji. The blast occurred about yards from the "Assassins Gate," one of the main entrances to the Green Zone, which houses the coalition headquarters.
Taxi driver Mohammed Saleh said he heard shooting after the explosion.
"I saw the roof of the car flying," he said. "My car was parked about 20 meters away when the explosion happened."
The bomb attack was the latest in a series of deadly assaults in the Iraqi capital.
On Saturday, a suicide car bomber in Baghdad killed four people and slightly wounded a deputy interior minister in Baghdad. On May 17, the president of the Iraqi Governing Council, Izzadine Saleem, was killed along with at least six other people near the coalition headquarters.
In other developments:
In another holy city, Karbala, militia fighters appeared to have abandoned their positions after weeks of combat.
After weeks of heavy clashes, children are back on the streets playing, cars are honking their horns and the hospital reports no new gunshot patients.
The military says Karbala is "firmly in control of Iraqi security forces" that work in conjunction with U.S. forces.
U.S. soldiers are using the relative peace to check damage and plan how to rebuild schools, the water treatment plant and hospitals.
The military says approximately 250 insurgents were killed during the fighting that began after al-Sadr launched an uprising last month. Four U.S. soldiers were killed and more than 50 were wounded.
Amid the continuing violence, worldwide attention is focused on the transfer of sovereignty next month. Mr. Bush travels late Monday to the Army War College in Carlisle, Pa., to give the first in a series of speeches about that looming handover.
Mr. Bush's prime-time speech will address two issues dominating U.S. efforts in Iraq: The creation of a new Iraqi interim government, whose leaders are to be announced within days, and ways to improve security in areas of Iraq still rife with violence.
White House spokesmen said the president would present a "clear strategy" on moving forward on political, security, humanitarian and infrastructure fronts, but they provided few details.
"He needs to demonstrate an appreciation for the hole we're in," said Ivo Daalder, a foreign policy analyst at the liberal-leaning Brookings Institution. "He shouldn't minimize the problems that we are confronting. He can't give the same speech that everything is going fine and 'I'm committed to seeing it through.'"
In his speech, Mr. Bush will talk about the new unelected, interim Iraqi government that will guide the country until elections can be held by Jan. 31, 2005.
He has lauded the work of U.N. envoy Lakhdar Brahimi, who is hand-picking an Iraqi prime minister, president and two vice presidents who will work with a cabinet of ministers in running day-to-day operations until elections can be held.
Mr. Bush will also discuss work on a new U.N. Security Council resolution, expected to be offered hours before the speech, that among other things is likely to recognize the new interim government in Baghdad and an end to the occupation and address ongoing security challenges.