The ceremony was held to mark Arbaeen, the 40th day after the martyrdom anniversary of Imam Hussein (AS), the third Shia Imam.
Iraq’s Baghdad News website quoted a local source as saying that most of the victims were women.
The source added that security forces immediately arrived at scene of the blast.
No group has so far claimed responsibility for the attack but the Daesh terrorist group has claimed similar attacks in the past.
Khanaqin is a city in Iraq’s Diyala Governorate, near the Iranian border. The majority of the town’s inhabitants are Shia Kurds.