A suicide bomber killed 46 people and wounded nearly 100 on Thursday in a crowded restaurant near Iraq's ethnically mixed city of Kirkuk, shattering the calm during a major Muslim holiday, police said.

The bomber detonated explosives inside the Kurdish restaurant, which was packed with government officials, women and children during lunch hour north of Kirkuk, a city disputed by ethnic Kurds, Arabs and Turkmen, police and a witness said.

Major General Torhan Abdul-Rahman, the deputy police chief of Kirkuk, said 46 people were killed in the blast and 93 wounded. It appeared to be the worst attack in Iraq since 63 people were killed by a truck bomb in Baghdad on June 18.

Violence has dropped sharply in recent months after more than five years of sectarian bloodshed and insurgency unleashed after the 2003 US-led invasion.

Iraqis have begun to venture out and resume normal life in areas where security is returning, but militants still stage regular attacks in volatile areas. Kirkuk has been one of the less violent cities.

The blast on Thursday shook Iraq as Muslims celebrated Eid al-Adha, a four-day religious holiday. Many people are off work and would be more likely to visit restaurants.

Hussein Ali al-Salih, head of a district council in the nearby city of Hawija, was in the restaurant called 'Abdullah', 10 km (6 miles) north of Kirkuk. He said it was crowded with women and children.

'After we had our tea, a huge explosion occurred. I saw bodies on the ground. As we were rushing to leave the restaurant, we saw women wounded and civilians,' he said. Five of his bodyguards were wounded.

Iraqi and American security forces sealed off the area following the bombing, a Reuters reporter in Kirkuk said.

Iraq's majority Arabs and minority Kurds have sparred over control of Kirkuk, 250 km (155 miles) north of Baghdad, which lies atop massive oil reserves.-Reuters