The blast, which took place around noon, caused panic in the area which is surrounded by residences.
"Initial investigations show that the bomb was planted on a motorcycle parked in the Institute of Hotel Management and it was detonated by a remote control," Inspector-General of Police, Fayyaz Leghari, told reporters.
The hotel management institute is located in the same lane and next to the Chinese Consulate in Defence area.
Leghari said three persons were injured in the blast, including a Rangers official who was on duty close by.
One car and up to three motorcycles parked nearby were reported to have been destroyed as a result of the blast.
Various police teams, including the Crime Investigation Department and the Special Investigation Unit, reached the spot to probe the incident which has caused concern in the government circles.
"We have also set a reward of one million rupees for any person who can provide us valid information which can lead to the arrest of the people behind this blast," Leghari said.
A large number of Chinese nationals who are either settled here with their businesses or who have come to Pakistan as part of different projects are based in Karachi.
Recently, extortionists had also targeted the office of a construction company in the nearby Khayaban-e-Shamsheer area in which one person was injured.
The advisor to the home department, Sharfuddin Memon, said information had been received that terrorist activities would take place in the ongoing month of Ramazan.
