The blast took place near Makki Masjid and explosives were planted on a motorcycle outside the mosque, Dawn reported.
The injured were shifted to the Jinnah Postgraduate Medical Centre (JPMC) after police and rescue services reached the site of the explosion.
Security personnel cordoned off the blast site and the Bomb Disposal Squad was called in as a search operation got underway.
Police said one of the killed could be an attacker.
A nearby building and vehicles parked in the vicinity were also damaged by the powerful blast.