The explosion ripped through the crowd killing at least 11 people and wounding 26, according to security and medical sources. Security forces were part of the victims.
The blast damaged several stalls at the market and gutted shops in the adjoining shopping center, with debris, glass and vegetables strewn across the ground, reports say.
The Sunni-dominated Islamic State group (IS) said, through its affiliated news agency Amaq, it targeted Shia Muslims.
The attack took place as Iraqi forces supported by Shia paramilitary forces are trying to take control of the last remnant resistance pockets of the terrorist group.
The army said Sunday it completely liberated Tal Afar’s town center. The regular troops are now advancing to take al-Ayadia district, about 10 km northwest of Tal Afar.
The Iraqi forces conquered Mosul; the second largest city occupied by the terror group. Other areas such as Hawija and Qaim in the north and Rawa, Ana in the west are yet to be liberated.