A female suicide bomber wearing a vest packed with explosives killed 16 people in Iraq on Friday in an attack on former Sunni Arab insurgents who have joined the security forces to fight al Qaeda, police said.

Another 27 people were wounded in the blast in the town of Muqdadiya, 90 km (55 miles) northeast of Baghdad, in volatile Diyala, a religiously and ethnically mixed province which has become one of the most dangerous areas of Iraq.

Police said the attack targeted a building used by members of the 1920 Revolutionary Brigades, a Sunni Arab insurgency group. A number of its members have begun working alongside security forces against al Qaeda.

Women and children were among the casualties, police said.

A surge of 30,000 extra U.S. troops and the growing use of neighborhood security patrols, organized by mainly Sunni Arab tribal leaders, have helped reduce violence in Iraq to its lowest levels in almost two years.

The security crackdown has squeezed Sunni Islamist al Qaeda out of their former stronghold in western Anbar, where the neighborhood units sprang up last year, into other areas north of Baghdad like Diyala.

CROWDED STREET

Witnesses said a woman walked up to the building, in a street full of shops, and began asking questions. She detonated the vest she was wearing when people who were out shopping before Friday prayers began gathering around her.

We saw several bodies. It is Friday and the area was crowded, Ammar Fadhel, a 35-year-old laborer, told Reuters.

Attacks against neighborhood police patrols have been increasing as the units, which the U.S. military calls concerned local citizens, spread throughout Iraq.

The U.S. military said the suicide bomber had targeted one of these units and put the death toll at 12, with another 18 wounded. All were civilians, it said in an e-mail to Reuters.

On Thursday, the leaders of four neighborhood units were killed by unidentified gunmen in a drive-by shooting in the town of Rabia in northwest Iraq near the Syrian border, police said.

About 50,000 people, including some former Sunni Arab insurgents, have signed up to the units and are being paid about $10 a day by the U.S. military to man checkpoints in their own communities.

About 10,000 more are working as unpaid volunteers. The Iraqi government this week said it planned to take over responsibility for many of the units.

While attacks have fallen 55 percent in Iraq since the surge was fully deployed in mid-June, General David Petraeus, commander of U.S. forces in Iraq, has warned that al Qaeda remains a dangerous foe that will seek to launch major assaults.

A militant group linked to al Qaeda in Iraq issued a threat on the Internet earlier this week vowing to launch a wave of attacks against Iraqi security forces.

U.S. commanders have identified Diyala and other areas of northern Iraq as the epicenter of the fight against al Qaeda.

Diyala has seen an upsurge of violence in the past week, with at least 51 people killed and about 80 wounded in five separate bombing and shooting attacks.

Colonel Raymond Thomas, an assistant commander of the U.S. division responsible for northern Iraq, said on Wednesday more troops were being sought for Diyala.

Suicide bombings carried out by women are rare in Iraq.

A similar attack by a female suicide bomber wounded seven U.S. soldiers and five Iraqi civilians on November 27 in Baquba, the capital of Diyala.

(Writing by Paul Tait; Editing by Sami Aboudi)

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