The explosion in a crowded compartment of the Shalimar Express occurred near Toba Tek Singh city this afternoon. The locally made explosive device was planted in a toilet in an economy coach, officials said.
"It was an act of terrorism. The bomb was planted in the washroom of a bogie," Railways Minister Khwaja Saad Rafique told reporters.
Three persons were killed and 35 injured in the explosion, state-run media reported. A child aged two-and-half years died in hospital, officials said.
The train, going from Lahore to Karachi, was crossing Chatiana railway station when the explosion occurred, witnesses and officials said.
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The train was stopped and rescue teams took the dead and injured to hospital. Police and Pakistan Railways personnel inspected the area and investigated the attack.
Footage on television showed the explosion had damaged the roof of a coach though the train was still on the tracks, suggesting a low-intensity device was used in the attack.
TV news channels reported that an anonymous caller had recently warned officials of Pakistan Railways that the train would be bombed if a payment of Rs 5 crore was not made. There was no official word on the alleged threat.
Shalimar Express, named after Lahore's famed Shalimar Garden, was one of the most prestigious trains of the cash-starved Pakistan Railways. It was suspended in 2010 before being revived as a luxury train with the involvement of a private firm in 2012.