No one claimed responsibility for the attack, but Sunni Muslim insurgents have stepped up their efforts to undermine Iraq's Shi'ite-led government and foment inter-communal conflict this year.
The bomb exploded in the town of Garmat Ali, around 20 km (12 miles) north of the usually stable oil hub of Basra.
"I was thrown back by the explosion. Then I stood up and ran back to help the victims," said bus driver Hameed Salman, his white clothes stained with blood.
"I carried five bodies myself and put them in some civilian cars to take them to the hospital," he added.
Three police sources said nine people had died. The head of the provincial security committee, Ali Ghanim al-Maliki, put the death toll at 10.
Another car bomb went off in a carpark for government offices in the city of Basra itself, wounding two people, police said.
Iraq's power-sharing government has been all but paralyzed since U.S. troops left more than a year ago. Prime Minister Nuri al-Maliki, a Shi'ite, is facing protests in the country's Sunni heartland, which shares a porous border with Syria.
Violence has increased with the swell of Sunni opposition to Maliki and Iraq's al Qaeda affiliate has urged protesters to take up arms against the government.
Security experts say al Qaeda-linked militants have been regrouping in the western province of Anbar and crossing into Syria to join mainly Sunni rebels battling forces loyal to Syrian President Bashar al-Assad, whose Alawite sect springs from Shi'ite Islam.
(Reporting by Aref Mohammed; Editing by Andrew Heavens)
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