At least 29 people were killed when a suicide bomber detonated his explosives near a Baghdad marketplace on Friday, the latest attack on a mainly Shi'ite neighbourhood since a political crisis erupted in December, police and hospital sources said.

The bomber exploded his vehicle near a passing Shi'ite funeral procession by a small street market in the Zaafaraniya neighbourhood, killing at least 29 and wounding around 60 more, police officials and sources at three hospitals said.

Iraqi authorities blame Sunni Islamist insurgents for attacks targeting Shi'ites in an attempt to stoke the kind of sectarian violence in 2006-2007 which killed tens of thousands.

The suicide car bomber failed to arrive at the Zaafaraniya police station so he blew himself up close to shops and the market, said an official at the office of Baghdad security spokesman Qassim al-Moussawi.

The funeral was for a Shi'ite real estate agent who was killed by gunmen in Baghdad a day earlier, police said.

A string of attacks has targeted Shi'ites during the crisis triggered when Prime Minister Nuri al-Maliki's government sought the arrest of a Sunni vice president and asked lawmakers to remove a Sunni deputy prime minister shortly after the last U.S. troops left Iraq on December 18.

Violence has eased since the heights of sectarian strife unleashed by the 2003 invasion that ousted Sunni dictator Saddam Hussein. But Iraqi forces are still battling Sunni insurgents and rival Shi'ite militias.

Maliki, a Shi'ite, says his moves against Sunni leaders were legal decisions and not politically motivated. But many Sunnis, already feeling alienated, worry measures are part of a drive by Maliki to consolidate his power at their expense.

(Reporting Kareem Raheem; writing by Patrick Markey; Editing by Myra MacDonald)