Diplomats based in the Baghdad neighbourhood said they could hear sirens blaring for around an hour after the attack.
A rare daytime rocket attack has hit Baghdad's Green Zone, security sources have said, as Iranian Foreign Minister Mohammad Javad Zarif met top Iraqi officials.
At least two rockets hit outside the US embassy in the high-security zone, they said.
The embassy's C-RAM rocket defence system was not triggered, possibly because the missiles' trajectory meant they would not strike within the compound.
Three dozen rocket attacks have targeted US military and diplomatic installations since October, but usually under cover of darkness.
This time, the attack took place in the searing afternoon heat as Iran's top diplomat held back-to-back meetings with senior Iraqi officials nearby.
Zarif first met his Iraqi counterpart Fuad Hussein early on Sunday, then Prime Minister Mustafa al Kadhimi, President Barham Saleh, Parliament Speaker Mohammed Al Halbussi and the head of Iraq's Supreme Judicial Council, Faeq Zeidan.
Zarif's visit to Iraq was the first since the American assassination of top Iranian General Qasem Soleimani outside Baghdad’s international airport in January.
The drone strike catapulted Iraq to the brink of a US-Iran proxy war that could have destabilised the Middle East.
Zarif is also set to travel north to the Kurdish regional capital of Erbil to meet with officials there.
The trip comes ahead of Kadhimi's own diplomatic flurry: he will visit Iran's regional rival Saudi Arabia on Monday, heading a delegation including his oil, electricity, planning and finance ministers.
PM @MAKadhimi receives in Baghdad the Foreign Minister of the Islamic Republic of Iran @Jzarif, discusses strengthening bilateral relations, and underscores Iraq’s balanced and positive role in addressing the challenges facing the region. pic.twitter.com/gDdWNgdKYk— Government of Iraq - الحكومة العراقية (@IraqiGovt) July 19, 2020
The Iraqi officials are to stay in NEOM, an area in the kingdom's northwest currently being developed as a futuristic city.
Kadhimi will meet Crown Prince Mohammed bin Salman, with whom he is known to have warm personal ties.
The delegation will then travel directly to Tehran late Tuesday, where Kadhimi is expected to meet Supreme Leader Ali Khamenei.
Pairing the two trips is an attempt to balance Iraq's complicated ties with both countries, observers say.
Iran has major military and political sway in Baghdad and is the second-largest exporter of consumer goods to Iraq.
But its influence irks both Saudi Arabia and the United States, which is urging Iraq to develop its diplomatic and economic ties with its Gulf neighbours.
Kadhimi rose to the premiership in May after serving as the head of Iraq's National Intelligence Service for nearly four years.
He formed close ties to Tehran, Washington and Riyadh during that time, prompting speculation he could serve as a rare mediator among the capitals.
Kadhimi is also set to visit Washington in the coming weeks, a major milestone in the strategic dialogue currently under way between the US and Iraq.
As part of the dialogue, the Iraqi government has pledged to better protect American installations from rocket attacks while the US vowed to keep drawing down its troop numbers across the country.