Images of the scene posted on social media showed a devastated market in the town of Al Qayyarah, 60 kilometres (40 miles) south of Mosul, with wounded being evacuated as bystanders watched on.
"The attack killed six people and wounded 26," doctor Abdelmoneim Majid al-Tabu, who heads the town's health service, told AFP.
Al Qayyarah was held by IS after they swept through northern Iraq in 2014.
The jihadists were ousted from the town in 2016, almost a year before they were driven out of Mosul.
While IS has now lost all its urban footholds in Iraq it retains the capacity to launch deadly attacks, with cells operating in desert areas along the border with Syria.
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