The bomber drew his booby-trapped vehicle up next to a bus carrying the pilgrims from neighbouring Iran then detonated his payload, police officials said.
The explosion wounded another 38 people, most of them Iranians, hospital officials said.
"It was a suicide bomber who drove up against a bus carrying Iranian pilgrims and detonated the explosives," a police official told AFP.
The bomber struck in the northern part of Karbala through which traffic headed to the tightly guarded shrines from the capital Baghdad passes.
Some 1,500 Shiite pilgrims a day from neighbouring Iran visit the faith's shrines in Iraq, in Karbala and Najaf further south as well as in the capital.
The attack came as political rivals who have been bickering over a power-sharing agreement that has left Iraq without a government for eight months were to meet in the northern Kurdish city of Arbil.
Foreign Minister Hoshyar Zebari said last week that a surge of violence in Iraq, including a hostage crisis by al Qaeda gunmen at a Baghdad church which left 46 worshippers dead, was due to the failure to form a government.
"The attacks and explosions... are due to the constitutional and political vacuum and the delay in the formation of the government, which gave the terrorists the opportunity to attack civilians," he said.
Monday's meeting in Arbil follows declarations in Baghdad on Sunday that the main Shiite and Sunni Arab-backed blocs in parliament had reached a deal whereby Nuri al-Maliki, a Shiite, would retain the premiership, a spokesman said.
"An agreement was reached yesterday among the political parties in which Jalal Talabani (a Kurd) will continue as head of state, Nuri al-Maliki will stay on as prime minister and (mainly Sunni-backed) Iraqiya will choose its candidate for parliament speaker," government spokesman Ali al-Dabbagh told AFP on Sunday.
Iraqiya, headed by former premier Iyad Allawi, won narrowly more seats than Maliki bloc in the March 7 parliamentary election and the two men had been bickering ever since over who should be prime minister.
Iran has been seen as a strong supporter of Maliki while Allawi, although himself a secular Shiite has drawn support from Saudi Arabia and other Sunni Arab states.
Dabbagh said Saturday's deal was between the National Alliance, which includes Maliki's bloc and the other main Shiite grouping, and the main Kurdish alliance, and that Iraqiya's support hinged on its agreement over the posts of parliament speaker and president.
Talabani, leader of the Patriotic Union of Kurdistan, is the current president but his position has been weakened by an electoral setback for his party in his stronghold of Sulaimaniyah.
Allawi's Iraqiya bloc said discussions were continuing over whether it or the Kurds should take the presidency.
Dabbagh said that some problems still needed to be resolved, but that parliament would meet on Thursday to choose a speaker, the first step towards forming a new government.
The spokesman added that both Maliki and Allawi would attend Monday's meeting in Arbil, capital of Iraq's autonomous Kurdish region.
US Secretary of State Hillary Clinton said during a visit to Australia on Monday that Iraq should have a government that was representative of all groups.
"We have been consistently urging the Iraqis to have an inclusive government that reflects the interests and needs of the various sectors of the population, that there had to be legitimate power-sharing amongst groups and individuals," Clinton said.
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