Twin blasts ripped through a busy market area in central Baghdad yesterday, police said, shattering a relative lull in attacks in the capital and marring preparations for New Year celebrations.

Two suicide bombers attacked the Al-Sinek area, killing at least 27 people and wounding 53, a police colonel said. An officer in the interior ministry and a hospital official confirmed the toll.

"Many of the victims were people from the spare parts shops in the area, they were gathered near a cart selling breakfast when the explosions went off," said Ibrahim Mohammed Ali, who owns a nearby shop.

Torn clothes and mangled iron were strewn across the ground in pools of blood at the site of the wreckage near Rasheed street, one of the main thoroughfares in Baghdad, an AFP photographer said.

The area is packed with shops, workshops and wholesale markets and usually teeming with delivery trucks and labourers unloading vans or wheeling carts around.

The attack was claimed by the Islamic State jihadist group via its propaganda agency Amaq, which reported the "martyrdom operation" in Al-Sinek neighbourhood.

Baghdad has been on high alert since the start on October 17 of an offensive, Iraq's largest military operation in years, to retake the northern jihadist stronghold of Mosul.

IS has tried to hit back with major diversionary attacks across the country but has had little success in Baghdad. Saturday's twin bombings were the deadliest in the capital since the start of the Mosul offensive.

Iraqi Prime Minister Haider al-Abadi had vowed earlier in 2016 that his forces would rid the country of IS by the end of the year but the Mosul operation has been slower moving that expected.

Huge crowds were expected to gather in the evening in Baghdad's streets to celebrate the New Year for only the second time since the lifting in 2015 of a years-old curfew.