The bomb attack hit the the procession held to mark the key holy festival of Ashura on a main road of Pakistan's biggest city on Monday, Dec 28.
The TV news reports on the blast showed a large plume of smoke over the site of the blast.
Ambulances were rushed into the spot.
"We are trying to ascertain whether it was a time bomb or a suicide attack, but it is a terrorist attack," senior police official Abdul Wahid Khan has been quoted as saying in media reports.
This came after a suicide bomber attacked a Shia march in Pakistan-administered Kashmir on Sunday, Dec 27.
Ashura, a month of mourning is marred by clashed between Sunni Muslim majority and its Shi'ite minority. In the view of this kind of tension, the security has been tightened across Pakistan.
Death toll is expected to rise.