At least five people were killed when a roadside bomb exploded on Friday inside a popular pet market in central Baghdad, which has been targeted several times in the past year, police said.

Police said another 12 people were wounded when a bomb hidden inside a box of birds went off among stalls in the crowded Ghazil pet market.

Witnesses said ambulances were trying to push through packed streets to get to the scene. The market only opens on Fridays and is a popular spectacle visited by hundreds of Baghdadis.

On November 23, a bomb also hidden inside a box of birds killed 13 people and wounded 57 in the Ghazil market, which sells a colourful range of creatures from guard dogs and monkeys to parrots, pigeons and tropical fish.

That bombing was a big psychological blow for residents of the capital who had begun returning to the streets of Baghdad after security crackdowns last year helped arrest a slide towards all-out sectarian civil war.

The market has been bombed a number of times, with about 10 people killed in two separate blasts there in January and February last year.

Violence has fallen sharply across Iraq, with the number of attacks down 60 percent since last June, allowing Iraqis to venture out to markets and restaurants as they attempt to return to a semblance of normal life.

The declining violence has been attributed to a "surge" of 30,000 extra troops, which became fully deployed last June, and the growth of primarily Sunni Arab neighbourhood police units.

The units sprang up in western Anbar province in late 2006 and helped drive al Qaeda out of their former stronghold in western Anbar province.

Despite the improved security, U.S. commanders warn that Sunni Islamist al Qaeda, blamed for most large-scale attacks in Iraq, remains a dangerous enemy. Al Qaeda has regrouped in the north after being driven out of Anbar and from around Baghdad.