The blast occurred in Qissa Khawani bazaar near a police station here.
Media reports say the blast took place in a car, parked near the police station. They said explosion was detonated with a remote device.
Rescue officials have reached the blast site and taken the injured to Lady Reading Hospital where an emergency was declared.
Many of the injured are in critical condition.
A fire erupted soon after the explosion and at least eight shops were also damaged.
All that was left was mangled remains of the bikes, cars and burnt shops.
The explosion occurred at a time when the shops were just opening.
This is the third blast since last Sunday when over 80 people were killed when twin suicide bombers struck at a historic church here.
On Friday, 19 people were killed when a bomb blast took place inside a bus carrying government employees