Zynab Al Harbiya, 12, was with her family at the Al-Faqma ice-cream parlour in Baghdad's central Karrada district in the early hours of Tuesday, local time, when a jihadist blew up an explosive-laden car parked outside.

The blast tore through the shop, which was packed with families, killing the Melbourne girl and at least 14 other people, and wounding 32 more.

"She was just going to buy ice-cream," her distraught cousin Layla AlSaabary told Channel Nine in Melbourne.

"We hear about these things, people the victims of terrorist attacks, and she was just going to have ice-cream after she broke her fast [for Ramadan].

"I still expect her to come and tease me, and play around, and make fun and joke.

"She is too small to go so early."

Ms AlSaabary also told the ABC that Zynab had been fearful of a bombing before she left Australia.

"She told my son before she left, she said 'I am scared of the bombs' and we said it is OK," Ms AlSaabary said.

Several children were among the dead, and graphic footage from the scene showed scenes of devastation, with body parts strewn across the ground.

Community members gathered at Melbourne's Imam Ali Islamic Centre for a memorial service on Wednesday afternoon.

Speaking outside the service, relative Ahmed AlSaabary, 51, told Fairfax Media two of Zynab's uncles had also been injured in the blast, but survived.

"She is a lovely girl, always spending time with my daughters," he said of Zynab.

"She loved education. She was always working here in this centre to help the families. Always volunteering. They are a very popular family."

Mr AlSaabary said Zynab, a year 7 student at Sirius College in Broadmeadows in Melbourne's north, travelled to Iraq with her mother, father and extended family about two weeks ago to visit her sick grandfather. Her parents arrived in Australia as refugees in 1997.

"She went to Iraq to see her grandfather. He got sick. All the kids, they love him," Mr AlSaabary said.

"It's very hard for my kids, they grow up together."

It's understood Zynab, from Thomastown in Melbourne, went to the ice-cream parlour with uncles about midnight as they ended their day of fasting for the Islamic holy month of Ramadan. During Ramadan, people refrain from eating between sunrise and sundown, often coming together to eat at night.

Ahmad Al-Yasery, 18, a close family friend, said Zynab and her uncles had just walked into the store when the blast went off.

"Her uncles are alright now, they're in hospital with burns," he said.

"She's a really hard working girl. She was born in Australia. She's always got a smile on her face."

Kiralee Mladenis, Zynab's English teacher, said she was much-loved by her classmates. She had joined the school about three months ago.

"She was extremely dedicated, the biggest issue that I had with her was her talking in class. She was loved by all of her friends," Ms Mladenis said.

"Before she went overseas she actually asked me for extra homework. She really cared about her studies and was extremely excited to go overseas.

"Everyone's in a state of shock. We're all just trying to be there for each other, as much as we can."

Esra Alver, the school's year seven coordinator, said Zynab's peers were being offered counselling, and had prayed for her on Wednesday morning. The school was trying to help them come to terms with the tragedy occurring during such a sacred time of year for Muslims.

"It's a very very sad event, especially happening during these blessed days," she said.

"It is sad, very upset with what's happened. It's not part of Islam, it's not part of our culture, so we definitely condemn this."

Islamic State has claimed responsibility for the attack, as well as a separate car bomb attack on the same night near the Shuhada Bridge, about six kilometres away from the ice-cream parlour.

The second bomb detonated outside an office where people collected their government pensions. It killed 14 and wounded at least 37, police said.

The death toll from the two attacks was the highest over a 24-hour period in Baghdad for several months.

Foreign Affairs Minister Julie Bishop said the ice-cream parlour attack underscored "the brutality of this terrorist organisation that shows no respect for religion, nationality, sovereignty, borders, no respect for humanity".

She said DFAT officials in Baghdad were providing consular assistance to Zynab's family.

A funeral service is expected to be held on Wednesday in Melbourne for Zynab, who was due to turn 13 next month.