An Iraqi security official, meanwhile, said the attacker was a Sunni Turkoman who had been detained by the U.S. military but was released four months ago under an Iraqi amnesty law.
The bomber may have avoided detection at a checkpoint leading to the busy market by having a man ride with him in the passenger seat, said the official, who spoke on condition of anonymity because he was not authorized to speak to the media. The passenger got off soon after the car passed the checkpoint, he added, citing witness reports and forensic tests.
Suicide car bombers are known to ride alone in most cases, so having a passenger next to them could help them avoid detection. Tal Afar, a frequent target of suicide bombings over the past five years, bans males from driving alone.
An indefinite curfew was imposed on the predominantly ethnic Turkoman town, the official said, adding the death toll had risen to 25 after four people died from their wounds.
Initial reports said the blast was caused by an explosives-laden car parked near a fruit and vegetable market. But Capt. Charles Calio, a U.S. military spokesman, said it was a suicide attack.
"One al Qaeda in Iraq terrorist died when he detonated a vehicle-borne bomb," Calio said in an e-mailed statement.
The blast occurred amid heightened tensions among ethnic groups throughout northern Iraq because of a dispute over control of the oil-rich city of Kirkuk. The city is claimed by the Kurds, who want to annex it to their self-ruled region, but its Arab and Turkomen residents want to remain under central government control.
The top U.S. diplomat and military commander in Iraq condemned the attack in Tal Afar, 260 miles northwest of Baghdad.
Ambassador Ryan Crocker and Gen. David Petraeus said in a joint statement Saturday that the "senseless" attack will further unite the Iraqi people to reject al Qaeda in Iraq and the "indiscriminate" violence it inflicts on civilians.
Northern Iraq has been suffering most from insurgent attacks while the rest of the country has seen the lowest levels of violence in four years. That improvement has been attributed to the dispatch of additional U.S. troops last year, a cease-fire by a Shiite militia and a revolt by Sunni tribesmen and insurgents against the al Qaeda in Iraq.
The deadly Tal Afar bombing was a grim reminder that al Qaeda in Iraq and other militant groups remain capable of executing major attacks in Iraq despite the presence of about 145,000 troops and what is widely perceived as improving Iraqi security forces.
Meanwhile, Georgia - the third largest contributor to the U.S.-led coalition in Iraq - said it is pulling out its entire 2,000-strong contingent from Iraq to join the fighting in the breakaway province of South Ossetia as soon as transport can be arranged.
A U.S. military spokesman said the departure of the Georgians will have "some impact" in the near term but no significant long-term effect on Iraq's security.
Col. Bondo Maisuradze, commander of the Georgia brigade, told The Associated Press Saturday that all his troops would be leaving, but he couldn't say when because transportation arrangements had not been finalized. "All the Georgian guys will be leaving for the homeland," he said.
The Georgians have asked the United States to provide transportation, and U.S. spokesman Capt. Charles G. Calio said all options are being considered.
In scattered violence Saturday, a bodyguard who works for Youth and Sports Minister Jassim Mohammed Ja'afar was gunned down outside his home near the city of Kirkuk, according to a police source who did not want to be named because he is not authorized to disclose the information.
Also in northern Iraq, gunmen shot dead a 50-year-old woman outside her home in the al-Maamoun district in Mosul, 225 miles northwest of Baghdad.
In the capital, an American soldier was killed and two others were wounded in a roadside bombing Friday night, the U.S. military said.