The Islamic State jihadist group has claimed responsibility for a truck bombing in a Shi’ite-majority area of northern Baghdad that killed at least 38 people.

The group said in an online statement that it carried out the “blessed operation” in Sadr City, which devastated a major wholesale vegetable market.

The blast, which was likely aimed at undermining confidence in the government and stoking sectarian tensions, came after the outgoing US army chief warned that reconciliation in Iraq is becoming increasingly difficult and that the country may ultimately have to be partitioned.

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The bomb went off in the wholesale vegetable market around 6.00am (1300 AEST) on Thursday, peak time for shops buying vegetables for the day.

At least 80 people were also wounded.

Medics collected human remains at the scene of the blast, an AFP photographer said.

The bombing devastated the market, killing horses used to transport vegetables, burning vehicles and leaving produce strewn in the street.

General Raymond Odierno, who served as the top US commander in Iraq from 2008 to 2010, said on Wednesday that Iraq may ultimately have to be divided up.

Asked if he saw any possibility of reconciliation between Iraqi Sunnis and Shi’ites, Odierno said that “it’s becoming more difficult by the day” and pointed to a future in which “Iraq might not look like it did in the past”.

Asked about partition, he said: “I think that is for the region and politicians to figure out, diplomats to figure out how to work this, but that is something that could happen.”

“It might be the only solution but I’m not ready to say that yet,” said Odierno.

Iraq has three main communities that would likely form the basis for the partition of the country if that were to occur: the Kurds, who already have an autonomous region, and the Sunni and Shi’ite Arabs.

But for now, “we have to deal with (IS) first and decide what it will look like afterwards”, Odierno said.