A suicide bomber killed at least 27 Shi'ite militiamen on the outskirts of the Iraqi town of Jurf al-Sakhar on Monday after security forces pushed Islamic State militants out of the area over the weekend, army and police sources said.

The attacker, driving a Humvee vehicle packed with explosives and likely stolen from defeated government troops, also wounded 60 Shi'ite militiamen, who had helped government forces retake the town just south of the capital.

Holding Jurf al-Sakhar is critical for Iraqi security forces who finally managed to drive out the Sunni insurgents after months of fighting.

It could allow Iraqi forces to prevent the Sunni insurgents from edging closer to the capital, sever connections to their strongholds in western Anbar province and stop them infiltrating the mainly Shi'ite Muslim south.

The group has threatened to march on Baghdad, home to special forces and thousands of Shi'ite militias expected to put up fierce resistance if the capital comes under threat.