At least 35 people have been killed and 60 injured in an attack on a Shia mausoleum north of Baghdad, security sources say.

The attack has been claimed by Islamic State, which has been losing ground militarily in Iraq but has instead hit back against civilians.

The attack began with rocket fire on Thursday night before a suicide bomber targeted police officers who were guarding the entrance to the Sayyid Mohammed shrine in Balad, about 93 kilometres from the Iraqi capital.

A second bomber went into the shrine with nine gunmen attacking security forces and families who had gathered to celebrate Eid al-Fitr, the holiday marking the end of the holy month of Ramadan.

Police say a third bomber was also killed before he could detonate his explosives belt.

The attack has also increased fears of growing tension between Iraq's Shias and Sunnis.

The Shias are a majority in Iraq but Sunnis are predominant in the northern and western provinces, including the area of Salahuddin, where the mausoleum is located.

Well-known Shia cleric Moqtada al Sadr has ordered his militia, the Peace Brigade, to deploy in the area in response to the attack.

They are already in nearby Samarra.

Just a few days ago, at least 292 people were killed in another IS attack in Baghdad.