"There was a car bomb attack targeting a vehicle of the security forces, it rammed the convoy and then exploded," Abdullahi Said, a police officer in the port town, told AFP.
"Several people have been killed, so far we confirm that eight were killed, but the toll could be higher, many of those who were injured were rushed to hospital."
The attack took place in a busy market area of Bossasso, the main port in Somalia northeastern Puntland region, lying on its Gulf of Aden coast.
Shebab militia have attacked military bases near Bossasso in the past, and its suicide commandos regularly launch bomb attacks or guerrilla raids.
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No one immediately claimed responsibility for the attack.
Tensions are high in the semi-autonomous region as candidates gear up for presidential and parliamentary elections scheduled for January 8.
The elections were originally due to have been held in July, but were postponed by the government which at the time said the risk of violence was too great to hold them.