Violence continued to rock Baghdad despite urgent appeals from political leaders on all sides urging Iraqis to stem sectarian clashes that threatened to push the country into all-out civil war.

Shiite militiamen grabbed six Sunnis as they left Friday worship services, doused them with kerosene and burned them alive near Iraqi soldiers who did not intervene, police Capt. Jamil Hussein told The Associated Press.

The attack came as members of the Mahdi Army militia set four mosques and several homes ablaze while killing Sunni residents in the once-mixed Hurriyah neighborhood of Baghdad.

Two of the mosques were attacked by militants toting rocket-propelled grenades. At least 25 Sunnis were killed and 14 wounded in the mosque attacks, Hussein said.

Imad al-Hasimi, a Sunni elder in Hurriyah, told Al-Arabiya television that he witnessed people being doused in kerosene and set afire.

The savage attack appeared to be in retaliation for Thursday's slaying of 215 people in the Shiite Sadr City slum, the bloodiest bombing in more than three years of war.

Residents of the Hurriyah neighbourhood also reported clashes between Shiite militiamen and Sunni insurgents armed with machine guns and rocket-propelled grenades.

Gunmen loyal to radical anti-American Shiite cleric Muqtada al-Sadr asserted control of the neighbourhood this summer and most of its Sunni residents had already left the area.

Violence also spread to the north of the country, where a co-ordinated attack by two suicide bombers ripped through a crowded market, killing at least 23 people and wounded 43 others.

The militants targeted a crowded market in the city of Tal Afar, which is about 420 kilometres northwest of Baghdad near the Syrian border.

According to police, the attack in Tal Afar involved explosives hidden in a parked car and in a suicide belt worn by a pedestrian that detonated simultaneously outside a car dealership at 11 a.m.

Police Brig. Khalaf al-Jubouri told The Associated Press the death toll was expected to rise.

Leaders of Iraq's Shia, Sunni and Kurdish communities appealed for calm in a show of unity.

The pre-eminent Shiite religious figure in Iraq, Grand Ayatollah Ali al-Sistani, urged Iraqis "not to react illegally and maintain self-restraint," one of his officials said.

The prime minister also pleaded of Iraqis not to resort to violence.

"We denounce sectarian practices that aim to destroy the unity of the nation," Nouri al-Maliki said in a television broadcast on Thursday.

Hundreds of mourners flooded the streets of Baghdad earlier on Friday as funeral processions got underway for the victims of the Sadr City attacks.

Men, women and children beat their chests, chanted and cried as they walked beside vehicles carrying wooden caskets tied to the rooftops.

"God is great. There is no God but Allah. Muhammad is the messenger of Allah," about 300 mourners chanted as they beat their chests while walking alongside slow-moving the vehicles carrying wooden caskets tied to the rooftops.

Once the processions reached the edge of Sadr City in northeastern Baghdad, the vehicles left most of the mourners behind and began the 160-kilometre drive south to Najaf, where the victims will be buried in the city's ancient cemetery.

Thursday's well-coordinated car bomb attacks in the Baghdad's Sadr City slum, the capital's main Shiite Muslim district were the deadliest attack of the war.

As cleanup crews continued removing pieces of human flesh from wreckage of the car bomb attacks, tents were erected where the families of the dead could receive condolences from friends and relatives.

The rest of Baghdad remains under a 24-hour curfew aimed at stopping the widespread sectarian violence but officials told media that political leaders were considering extending the curfew.

The persisting violence underlines the failure of Iraqi forces to suppress sectarian conflict at a time when the United States could be considering a move to accelerate the hand-over of security responsibilities.

"We condemn such acts of senseless violence that are clearly aimed at undermining the Iraqi people's hopes for a peaceful and stable Iraq," White House spokesman Jeanie Mamo said in Washington.

With files from The Associated Press