* Suicide bomber kills at least 23 people

* Bomb targeted an Sunni Arab poll campaign lunch

* At least 72 wounded

By Sami al-Jumaily

KERBALA, Iraq, Jan 2 (Reuters) - A suicide bomber killed at least 23 people and wounded 72 on Friday at a feast for Sunni Arab electoral candidates and tribal leaders in a town near Baghdad.

The bombing took place a day after the U.S. military presence in Iraq came under an Iraqi government mandate, and weeks before provincial elections which could reshape the political landscape across the country.

Eyewitness Falah Abdul-Hadi said Sheikh Mohammed Abdullah Saleh, a Sunni leader of the al-Qaraghouli tribe, hosted the lunch for a group of electoral candidates at his home on the outskirts of Yusufiya, 20 km (12 miles) south of Baghdad.

About 500 people were gathered under a marquee attached to the house, Abdul-Hadi said. The bomber, a relative of the host named Amin al-Qaraghouli, blew himself up among the quests.

"There was a huge explosion then the tent was engulfed in flames. People were running away and some were bleeding," Abdul-Hadi said. "Then we started evacuating the bodies and wounded."

The sheikh and one of the electoral candidates were among the wounded, he said.

Iraqi security spokesman Major-General Qassim Moussawi and the U.S. military said 23 people were killed in the blast. An Iraqi security source said as many as 30 people died and more than 100 others were hurt.

Moussawi said 72 people were wounded, some seriously.

Violence has dropped sharply in Iraq from the peak of sectarian bloodshed in 2006 and 2007, but U.N. and U.S. officials expect a resurgence ahead of the Jan. 31 provincial elections -- a prediction that is already bearing out.

On Wednesday, gunmen walked into a cafe in central Mosul and killed Mowaffaq al-Hamdani, a member of the Sunni Arab "Iraq for Us" party list.

U.S. PRESENCE REDUCING

Sunni Arab militants have frequently targeted tribal gatherings since many tribes turned against insurgents.

Almost six years after the U.S-led invasion, more than 140,000 U.S. troops in Iraq are gradually reducing their activities ahead of an end-2011 departure deadline contained in the pact which took effect at midnight on New Year's Eve.

U.S. forces handed over control of the Green Zone, the fortified swathe of central Baghdad that was the heart of U.S. power in Iraq since 2003, to Iraqi forces on Thursday. Combat troops are supposed to leave Iraqi towns and cities by mid-2009.

Britain on Thursday formally handed over responsibility for the running of Basra airport to Iraqi authorities, paving the way for Britain to withdraw its 4,100 troops this year.

But the United States is still providing major military, administrative and financial backing to Iraq.

In the northern city of Mosul, feuds between Arabs and Kurds are threatening to reignite tensions. The U.N. Mission to Iraq on Thursday condemned assassinations and army raids carried out against electoral candidates in Mosul in the past month.

Shi'ite parties across Iraq's south are jockeying for influence, while established Sunni political parties risk losing ground to new movements linked to tribal guard units that have helped curb violence and rout al Qaeda militants.

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