A man with explosives strapped to his body somehow avoided detection by guards and joined the crowd. When he detonated his charges, he killed some 60 people and wounded scores of others.
The attack has been claimed by the Islamist extremist group Ansar al-Sunna. The same group claimed responsibility for bombings in Arbil in February 2004 that killed 105 people -- the only other attack of such a scale in northern Iraq since the U.S. invasion.
Hiwa Osman, a regional expert with the London-based Institute of War and Peace Reporting who works in the northern Iraqi city of Suleimaniyah, says Ansar al-Sunna is the successor group to the better-known Ansar al-Islam, a radical Kurdish Islamist group. That group waged a long war on the Kurdish secular administration in northern Iraq until it was forced from its bases in northern Iraq by the U.S. invasion.
"When it was Ansar al-Islam, most of [the members] were Kurds but nowadays, after the fall of Baghdad [Saddam Hussein], and then being kicked out of their strongholds on the Iranian border, now they have regrouped under a new name, Ansar al-Sunna," Osman said. "The reason they have chosen this name is because they are now mostly operating out of areas of Iraq that are not under Kurdish control. They have managed to recruit non-Kurdish members [and] they've struck alliances with other hard-line Islamist groups."
Analysts said Ansar a--Sunna is now made up of both Kurdish and Arab Sunni militants. It is believed to have forged ties with both Al-Qaeda and former Saddam loyalists as part of the loosely allied anti-U.S. insurgency.
Yesterday's attack comes just one day after Iraq swore in a new cabinet that gives the Kurdish secular parties their most prominent role ever in modern Iraq's political affairs. The Kurds hold eight cabinet posts, second in number only to Iraq's majority Shi'a. Additionally, the new president of Iraq is Jalal Talabani, head of one of the two main Kurdish factions, the Patriotic Union of Kurdistan (PUK).
Iraq's formerly dominant minority under Saddam Hussein -- the Arab Sunnis -- are expected to get seven seats in the cabinet. However, the selection process has been complicated by the fact that the Sunni largely boycotted Iraq's January vote for the National Assembly and some key leaders remain on the margins of the political process.
The timing of the attack raises the question of whether the anti-U.S. insurgency -- which is most active in Arab Sunni areas -- is now aiming at Kurdish targets in response to the Kurds' political resurgence. Some militant groups have previously launched similar large-scale attacks against Shi'a targets in hopes of fanning communal conflicts.
One top militant -- Iraqi al-Qaeda leader Abu Mus'ab al-Zarqawi -- has referred in captured documents to civil war as something that could make Iraq untenable for U.S. forces.
Osman said that Kurdish leaders are responding to this week's attack in Arbil by tightening security along the Kurdish-controlled region's borders with the rest of Iraq.
"The main cause for these incidents is infiltration from areas to the south of Iraqi Kurdistan," Osman said. "What we have seen in the past is that every time an incident like this happens, security is beefed up, checkpoints on the borders with the rest of Iraq are strengthened, and more security personnel are put on the street [of Kurdish-controlled cities]."
Leaders of both the Kurdish and Shi'a communities have said they will not be drawn into any communal conflicts. They include the head of the largest Shi'a party leader, Abd al-Aziz al-Hakim of the Supreme Council for the Islamic Revolution in Iraq (SCIRI), who has previously said he will not respond to armed provocations.
But the danger of such conflicts remains because of Iraq's many militias formed along communal and political party lines. They include the well-armed and trained "peshmerga" fighters of both Kurdish secular parties -- the PUK and the Kurdistan Democratic Party.
Washington has called in the past for the disbanding of the armed forces outside of Baghdad's control, but the issue has yet to be resolved. The question of the some 80,000 peshmergas' fate, for example, was one of the most difficult points for Kurdish and Shi'a politicians to agree upon in forming the new Iraqi government.
Kurdish leaders insisted on maintaining a fighting force loyal to the government of the Kurdish region as part of a federal Iraq. A spokesman for the PUK, Azad Jundiyan, said at the end of the negotiations that it was agreed "that some peshmerga will join the Kurdistan police and some will be part of the Iraqi army." The Iraqi army takes orders from the Defense Ministry in Baghdad.
So far, the Iraqi national army remains only a fledgling force. Recent reports put the total number of Iraqi security forces -- including military and police -- at 140,000. But the quality and capabilities of the forces vary widely and training and equipping of many units continues.