A car bomb has killed 120 people and injured at least 130 at a busy market in an Iraqi town, officials have said.

The attack happened in the predominantly Shia town of Khan Bani Saad, north of the capital Baghdad.

Children were among those dead in the explosion, which came as people celebrated the end of the Muslim holy month of Ramadan.

The Islamic State (IS) group, which control swathes of the country, has said it was behind the attack.

A statement from the group said one of its members drove three tonnes of explosives into a crowd.

Police major Ahmed al-Tamimi told Reuters the damage was "devastating".

"Some people were using vegetable boxes to collect children's body parts," he said.

The Diyala provincial authorities have declared three days of mourning and cancelled festivities for Eid al-Fitr, which marks the end of Ramadan.

IS militants are battling government forces in the north and west of the country.

The group captured parts of Diyala last year. Although IS was later driven out, it still has a presence there.