Ahmed Hashem, a major and medic in the Iraqi army speaking to AFP from a field hospital, said the attack took place in the Mashahda neighbourhood of the Old City.
"We received 12 people killed and more than 20 wounded in our field hospital, including women and children," he said.
A colonel in the army's 16th infantry division said it was difficult to get a definitive casualty toll because the area where the attack happened was not fully cleared.
"The suicide bomber infiltrated a group of displaced people and blew himself up among them before reaching our troops," he said.
Around 100,000 more remain trapped by the extremists, who have made human shields a key element in their defence of the Old City, their last redoubt in Iraq's second city.
The security forces have been wary of Iraqi IS members attempting to flee the Old City death trap by blending in with the population, while the Chechen, French and other foreign extremists stay behind to mount a suicidal last stand.
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