The accident took place on a highway connecting the holy city of Najaf to the northern city of Samarra.
The driver fell asleep and the bus swerved off the road near Hilla — the capital city of Babel province — 100 km (62 miles) south of Baghdad, a police official told Aswat al-Iraq news agency on Thursday.
The bodies were taken to a Hilla hospital morgue and those injured are receiving medical treatment.
Pilgrims from Iran have flocked by the millions to the neighboring Iraq's Shia shrines in Karbala and Najaf cities since the fall of former Iraqi dictator Saddam Hussein.
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