The blast was the deadliest in a series of attacks that left at least 72 Iraqis dead, including six youths killed when mortar rounds slammed into a soccer field in eastern Baghdad.
Two U.S. soldiers also were killed Monday in a roadside bombing north of Baghdad, bringing the American death toll closer to 4,000 as the U.S.-led war enters its sixth year. At least 3,990 members of the U.S. military have died since the beginning of the Iraq war in March 2003, according to an Associated Press count.
The violence marred overlapping trips by Vice President Dick Cheney and Sen. John McCain to Baghdad. Their visits were aimed at touting recent security gains and stressing Washington's long-term commitment to fighting insurgents in Iraq.
The U.S. Embassy and military issued a joint statement blaming al Qaeda in Iraq for the Karbala attack.
The bomber struck after the worshippers had gathered at a sacred historical site about half a mile from the golden domed shrine of Imam Hussein, a grandson of the Prophet Muhammad who was killed in a seventh-century battle.
A police officer, speaking on condition of anonymity because he wasn't authorized to release the information, said the attacker was a woman - as did a witness.
The U.S. military described the attack as a suicide operation but put the casualty toll at 40 Iraqis killed and 65 wounded. The U.S. statement said the identity of the bomber remained unknown.
Brig. Gen. Raed Shakir Jawdat, Karbala's police chief, said 43 people were killed and 73 wounded. He denied it was a suicide attack, saying a bomb had been planted in the area. The discrepancies could not immediately be resolved.
Karim Khazim, the city's chief health official, said seven of those killed were Iranian pilgrims who had traveled to the holy site.
AP Television News footage showed a man carefully picking up pieces of flesh and wires apparently from a fuse as evening prayer services were broadcast from loudspeakers nearby.
The witness, who did not identify himself, told AP Television News that a woman in the crowd had blown herself up.
If true, it would be among the deadliest attacks carried out by women during the Iraq conflict.
Female suicide bombers have been involved in at least 20 attacks or attempted attacks since the war began, including the grisly bombings of two pet markets in Baghdad that killed nearly 100 people last month.
The U.S. military has warned that insurgents are using female attackers because they can more easily avoid checkpoint searches and can hide the explosives under traditional all-encompassing black Islamic robes.
Police closed the area around the twin golden dome mosques and blocked all roads leading to the sites, which include tombs of Imam Hussein and his half brother, also a Shiite saint.
Ali Hassan, 30, a clothing merchant who was wounded in the blast, said he was standing near his stall "when I heard a big explosion and I felt strong fire throwing me in the air."
"The only thing I know is there was a big explosion and I saw bodies flying in the air," said Hassan Khazim, 36, who was wounded in the face. "All the tight security measures designed to protect us were in vain."
The predominantly Shiite city of Karbala, 50 miles south of Baghdad, enjoys tight security. Monday's attack was the deadliest in Karbala since a suicide car bomber killed at least 63 people on April 28, 2007.
Explosions also struck earlier Monday not far from the capital's heavily fortified Green Zone, shortly after Cheney arrived. Helicopter gunships circled central Baghdad.
Despite several high-profile bombings, violence levels have dropped sharply in recent months with a U.S. troop buildup, a Sunni revolt against al Qaeda in Iraq and a cease-fire by radical Shiite cleric Muqtada al-Sadr's Mahdi Army militia.
But noting the fragility of the security gains, Cheney warned against large drawdowns of American troops, saying it is very important that "we not quit before the job is done."
Cheney said there was no question but there had been a dramatic improvement in security - but not dramatic enough to allow Cheney's office to make his exact plans public, reports CBS News chief foreign correspondent Lara Logan.
Logan reports the primary focus of Cheney's visit will be to push Iraqi officials to unite across the bitter Shiite-Sunni sectarian divide which has largely crippled the government's efficacy, as he's concerned the political landscape is not improving at the same pace as the security situation.
McCain, the presumptive Republican presidential nominee who has linked his political future to military success in Iraq, also promised to uphold a long-term military commitment to the country so long as al Qaeda in Iraq is not defeated.
Both men met in back-to-back meetings with Shiite Prime Minister Nouri al-Maliki, whose government has been accused of failing to make sufficient political progress.
Al-Maliki said he and the vice president discussed ongoing negotiations over a long-term security agreement between the two countries that would replace the U.N. mandate for foreign troops set to expire at the end of the year.
"This visit is very important. It is about the nature of the relations between the two countries, the future of those relations and the agreement in this respect," the prime minister told reporters. "We also discussed the security in Iraq, the development of the economy and reconstruction and terrorism."
McCain stressed it was important to maintain the U.S. commitment in Iraq, where a U.S.-Iraq operation is under way to clear al Qaeda in Iraq from what the military says is the terror group's last urban stronghold of Mosul, 225 miles northwest of Baghdad.
"We recognize that al Qaeda is on the run, but they are not defeated," McCain said after meeting al-Maliki. "Al Qaeda continues to pose a great threat to the security and very existence of Iraq as a democracy. So we know there's still a lot more of work to be done."
McCain, who arrived in Iraq on Sunday, told reporters that he also discussed with the Shiite leader the need for progress on political reforms, including laws on holding provincial elections and the equitable distribution of Iraq's oil riches.
Sen. Carl Levin, D-Mich., speaking to reporters from Kuwait after a visit to Iraq, said Iraq should begin picking up more of the bills.
"We're paying for things that Iraqis clearly should be paying for," Levin said. "They have the capability, the surplus funds to do their own reconstruction, and to do their own weapons purchases and other things which we're paying for and they need to pay for."
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