There were conflicting accounts from officials as residents and police reported the sound of clashes continuing, roadblocks thrown up around the town of Mahmudiya, which lies on the main highway south from Baghdad, and patchy telephone communications.

Officials in Baghdad put the death toll at around 40, a local police commander put it at 55 and Iraqiya state television ran a flash later putting the number of dead at 70. Police and the Interior Ministry could not immediately confirm that figure.

There were reports of a car bomb, a mass gun attack and also an ambush against a funeral convoy of Shia mourners heading between the capital and traditional burial sites at Najaf.

This latter version prompted members of parliament from the Shia Islamist faction led by militant cleric Moqtada al-Sadr to quit Monday's session of the legislature. Leaders told a news conference that 41 people had been killed in the ambush.

The attack came on the anniversary of the 1968 coup that brought Saddam Hussein's Baath party to power. Dominated by the Sunni minority, the party oppressed Shias for 35 years.

Initial reports from police in the town, Interior Ministry officials in Baghdad said, indicated that a car bomb had devastated a crowed market -- far from the first such attack in a restive area dubbed the 'triangle of death' by the media.

But a police commander contacted in the town itself told Reuters that a series of explosions, reported by residents, were mortars falling on the town, followed by a rampage by gunmen through the market -- a rare tactic in Iraq against civilian targets, although seen a week ago in Baghdad.

Colonel Iyad Mohammed of the Mahmudiya police said 55 people were killed and 58 wounded. The ministry sources in Baghdad had earlier put the toll at 42 dead and 33 wounded.

The identity of the attackers was not clear.

Sunni insurgents like al-Qaeda and Baathist diehards as well as Shia militias have been active in the area, where the population is mixed between the two Muslim sects whose violent differences have taken Iraq to the brink of civil war.

One Interior Ministry official said police were battling "black-clad gunmen," often a description applied to fighters from Sadr's Mehdi Army militia. The official declined comment on the assailants' identity.