Blast at market in Khan Bani Saad kills at least 100 people celebrating the end of Muslim month of Ramadan.

A car bomb has exploded in a busy market in an Iraqi town, killing at least 100 adults and children celebrating the end of the Muslim fasting month of Ramadan, police have said.

Dozens of people were also wounded by the blast in Khan Bani Saad, approximately 30km northeast of the capital Baghdad.

The Islamic State of Iraq and the Levant (ISIL) group claimed responsibility for the attack on Twitter and said the car was carrying around three tonnes of explosives.

Angry crowds went on the rampage after the explosion, smashing the windows of cars parked in the street in grief and anger.

"Some people were using vegetables boxes to collect body parts of kids' bodies," said police major Ahmed al-Tamimi from the site of the explosion, describing the damage to the market as "devastating," the Reuters news agency reported