The suicide bomber detonated his explosives-laden belt inside the popular coffee shop in the provincial capital Baquba, some 57 km north of Baghdad, Friday evening.
The cafe is located in the district of Baladruz, where the majority of residents are Shiite Kurds. Six nearby shops were also severely damaged.
A curfew has been imposed in the city, which was once a stronghold of Al Qaeda.
The blast was the first major attack in Iraq in several weeks. It comes amid a political stalemate surrounding the formation of a new government that has dragged on for nearly eight months.
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