A suspected al-Qaeda suicide bomber detonated a lorry full of explosives outside one of Baghdad’s most famous Shia Muslim mosques yesterday, killing nearly 80 people and raising fears of a new round of sectarian violence.

One of Baghdad’s busiest commercial districts shuddered with the impact of the afternoon explosion in a car park near the Kholani mosque, a well-known landmark. A pall of smoke obscured the area. When it cleared, the distinctive turquoise dome of the shrine appeared undamaged but the explosion wreaked havoc in the crowded streets below.

Witnesses said that car drivers and passengers were incinerated in their vehicles. Others were crushed in the rubble of collapsing walls and buildings. Sheikh Saleh al-Haidari, the mosque’s imam, said that many of his worshippers had been killed or injured. “This attack was planned and carried out by sick souls, damaging the mosque’s outer wall and collapsing my office and the room above,” he said.

Rescue workers dragged the charred remains of 78 dead from the wreckage. Nearby hospitals were overwhelmed by more than 200 injured.

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The attack was precisely what the Iraqi authorities and the US military had feared. Last week al-Qaeda was blamed for the destruction of the revered al-Askariya Shia shrine in Samarra, hit for a second time. The Government imposed a four-day curfew after the attack but was unable to prevent revenge attacks on Sunni mosques.

Nouri al-Maliki, the Iraqi Prime Minister, said that the latest bombing was the work of an alliance between former members of Saddam Hussein’s regime and Sunni Muslims determined to provoke sectarian strife. “Once again the groups of conspiracy, terror, and takfir [Sunni extremism] have violated the sanctity of houses of God and spilt the blood of innocent lives,” he said.

The move was a blow to the US military, which had launched a massive military offensive outside Baghdad to stop al-Qaeda carrying out precisely such an attack. The US said that 10,000 of its troops were involved in Operation Arrowhead Ripper, started early yesterday with an assault by armoured columns and helicopter gunships on targets near Baquba, the regional capital of Diyala province.

The area, once an agricultural backwater, has become a magnet for al-Qaeda fighters, who have been squeezed out of their stronghold in western Anbar province. According to locals, al-Qaeda established a mini state in Baquba, where locals were forbidden “un-Islamic” activities such as smoking, going to restaurants or visiting internet cafés.

US troops made a harrowing discovery on their doorstep when they came across two dozen emaciated boys at a government-run orphanage for special needs children in central Baghdad. Some of the boys were tied to beds and covered in their own faeces, according to a report by CBS television. Food and clothes destined for the orphans lay unopened on shelves.

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