The explosion is likely to intensify the civil war between the two main Kurdish parties which has been raging since December, though the bomb may have been planted by Iraqi intelligence. It went off just after 8am in the soukh, or market, at Zakho, which is close to the Turkish border and the crossing point for traffic going to and from Iraqi-government controlled territory. The area is controlled by the Kurdish Democratic Party.
Hoshyar Zebari, KDP spokesman in London, said security forces from his party held the rival Patriotic Union of Kurdistan, which is powerful in eastern Kurdistan, responsible for the car bomb.
But a PUK official, Kosrat Rassoul, in the city of Arbil, blamed the attack on "Baghdad intelligence services".
Zakho is at the heart of the dispute between the KDP and PUK which has led to heavy fighting in the last two months. About 1,000 Turkish trucks travel every day through the town bringing food and goods to the northern Iraqi city of Mosul and picking up cheap petrol for sale in Turkey.
On crossing the border at the Khabur bridge they pay a tax, which is one of the few sources of revenue available in Kurdistan.