A car bomb killed 11 people and wounded 42 at a crowded bus stop in a predominantly Shi'ite neighbourhood in northwestern Baghdad on Tuesday, Iraqi police said.

"The car bomb targeted a gathering of civilians at the bus stop in al-Hurriya neighbourhood. It killed 11 people," a police source who declined to be named said.

Violence in Iraq has fallen to its lowest level in four years, but sporadic shootings, bombings and rocket attacks have continued.

Eighteen people were killed in an explosion in Baghdad on June 4. Iraqi police said it was caused by a truck bomb but the U.S. military blamed it on a misfiring militia rocket.

U.S. and Iraqi officials have highlighted the drop in sectarian violence and attacks on security forces five years after the U.S.-led invasion to topple Saddam Hussein, but U.S. commanders have warned the improvements are fragile and reversible.

Prime Minister Nuri al-Maliki has also cracked down on Shi'ite militias in Baghdad and the city of Basra in the south and Sunni Arab insurgents in the north.