A car bomb exploded Thursday along a bustling commercial street in a mostly Shiite area of north Baghdad, killing at least 20 people in the third major attack in the capital this month.

Recent high-profile blasts suggest that Sunni insurgents are trying to mount a comeback as the U.S. prepares to leave Iraqi cities in three months and hand over responsibility for security in the capital to the Iraqis.

Shaken survivors voiced fears that the blast heralded a return to violence that swept the Iraqi capital before U.S. and Iraqi forces turned the tide in late 2007.

Witnesses said the vehicle — believed to be a yellow Peugeot — was parked along a street near a bus stop, a food market and a hospital in the Shaab district when it blew up around noon.

The blast shattered small shops and food stalls, scattering apples, oranges and bananas in pools of blood, Associated Press Television News video showed. At a nearby hospital, doctors cleaned wounds of frightened children as they cried out in pain.

Shaab, located on the northern fringes of the city, had been a mixed area of Sunnis and Shiites until many Sunnis were driven out in the wave of ethnic slaughter two years ago.

The Iraqi army's Baghdad command said 20 people were killed and 73 wounded in Thursday's blast. An Interior Ministry official said 22 civilians were killed and 48 wounded. Local police and hospital officials put the toll at 26 killed and 37 wounded.

The officials all spoke on condition of anonymity because they were not supposed to release information to the media.

"This blast came at a time when the security situation has improved. We don't know why it happened. The blast targeted innocent people," witness Majid Khalid said.

Nadhum Mohammed Talib, a 21-year-old college student, said he was walking home from the bus stop when the blast shook the area and set several cars on fire.

"I fell to the ground and saw a huge fireball with smoke that covered the area," he said. "I feel sad that violence is coming back after a recent period of calm security."

The blast occurred one day after a U.S. military spokesman said that attacks nationwide had fallen to their lowest level since the early months of the war.

Nevertheless, there are troubling signs that Sunni militants such as Al Qaeda in Iraq may be trying to regroup, possibly from bases outside the capital including nearby Diyala province which remains unsecure.

Three days ago, a suicide bomber struck a Kurdish funeral gathering in northern Diyala, killing 27 people.

On March 8, a bomber killed at least 30 people near the heavily guarded police academy in east Baghdad. Two days later a bomber killed 33 people as Sunni and Shiite tribal leaders toured a public market on the western outskirts of Baghdad after a reconciliation meeting.

A U.S. military intelligence officer said Wednesday that U.S. troops had noted an uptick in attacks against Iraqi military and police commanders in communities around the southern rim of Baghdad, although he believed Iraqi forces could cope with the situation.

Last week, Brig. Gen. Frederick Rudesheim, a deputy commander of U.S. forces in Baghdad, said U.S. troops would go after extremist bases outside Baghdad after they move out of the capital by the June 30 deadline laid down in the U.S.-Iraq security agreement.