Diyala governor Abdulnasir al-Muntasirbillah described the scenes at the hospital in Baquba as "catastrophic".
"Words can't express it. It is a dirty, cowardly terrorist act," he was quoted by Reuters as saying.
The BBC's Jim Muir in Baghdad says if the Baquba casualty figures are confirmed, this will be the deadliest such attack this year.
Diyala has remained one of the two main areas of Iraq which have defied all efforts to bring them under control, our correspondent says.
Officials in Baghdad said the suicide bomber there infiltrated the crowd of displaced families as they received supplies from police in a square near the city centre.
The people had been made homeless by the sectarian conflict which erupted following the 2003 US-led invasion of Iraq.
At least five children were among the dead and more than 50 people were wounded, police say.
One man, injured by shrapnel from the blast, said a fire erupted as he waited for a bus.
Issam Salim, 35, told Associated Press news agency: "I turned around as I fell to the ground and saw a big fire break out with black smoke.
"Women and children are crying from pain beside me in the hospital. Some of them suffered burns."
Meanwhile, Iraqi media quoted security officials saying they had arrested Abu Omar al-Baghdadi, the purported leader of the Sunni Arab group the Islamic State in Iraq.
However, defence ministry spokesman Maj Gen Mohammed al Askari told the BBC "we're not sure" when asked about the arrest.
DNA and other investigations had yet to establish the identity of the man arrested, the BBC was told.
In Washington, a Pentagon spokesman said the US military was investigating the arrest claim, AP reported.
On Wednesday, the US Department of Defence's top Middle East adviser said insurgent attacks would probably increase as US forces started to leave, but added that there was no plan to delay troop departures.
US President Barack Obama says the Pentagon will withdraw all but 35,000 to 50,000 troops from Iraq by the end of August 2010.
A joint security agreement requires all US troops to be out of Iraq by the end of 2011.
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