* Bomb hits Shi'ite funeral ceremony in south
* Recent attacks fueling sectarian worries (Adds byline, more details, new death toll)
By Kareem Raheem
HILLA, Iraq, Sept. 30 (Reuters) - At least 18 people were killed in Iraq and dozens more wounded on Friday when a large car bomb exploded among mourners crowding into a Shi'ite funeral in the city of Hilla.
The blast left burned bodies and damaged vehicles scattered near a mosque where relatives had gathered in a tent for the funeral of a local sheikh, witnesses said.
"Suddenly the place turned into hell," said Haider Qahtan, 37, whose hand was injured in the blast. "All my relatives were cut down and their bodies were burned."
Police officials at the scene put the death toll at 18 at least, with a further 63 people wounded.
Violence in Iraq has eased since sectarian strife took the country to the brink of civil war a few years after the 2003 U.S. invasion. But Sunni Islamists tied to al Qaeda and Shi'ite militias still attack almost daily as American troops prepare to leave at year end.
Hilla, 100 km (60 miles) south of Baghdad, is a mainly Shi'ite city on a route used by pilgrims visiting Shi'ite holy sites to the south.
Sunni insurgents have often targeted Shi'ites with car bombs and suicide attacks in an attempt to rekindle sectarian tensions and test Iraq's government and security forces.
Recent attacks and incidents in the Sunni heartland of Anbar in western Iraq and in the Shi'ite holy city of Kerbala have fueled worries of resurgent sectarian violence and tensions over who controls disputed areas.
More than eight years after the invasion that toppled Saddam Hussein, U.S. troops are scheduled to pull out when a security pact expires Dec. 31. About 44,000 U.S. troops are still in Iraq mainly advising and assisting the Iraqi forces.
U.S. and Iraqi officials say local armed forces are capable of containing the country's weakened by stubborn insurgency, but they say U.S. trainers may stay on to help Iraq's military fill some capability gaps such as air and maritime defence. (Additional reporting by Waleed Ibrahim and Muhanad Mohammed; Writing by Patrick Markey; Editing by Alastair Macdonald)