More than 15 people were wounded in the attack in Faisal Avenue, one of the main roads in Pakistan''s politically tense economic capital, where NATO ships berth with supplies for troops in Afghanistan.
Four naval sailors and a passing motorcyclist were killed in the blast at around 8.15 in the morning as the Navy bus carrying the sailors was leaving the Pakistan Navy's Mehran base on the main Karsaz-Shahrah-e-Faisal road, a naval spokesman and other officials told the media.
The injured were rushed to hospitals, where condition of one civilian was reported to be serious. The attack comes just days after the Pakistan Army Chief General Ashfaq Parvez Kayani declared that his army had "broken the back" of the Taliban and al Qaeda linked militants in the country.
Television footage showed that the blast was so powerful that it blew sign boards on the entire avenue, left a fuel pump in tatters and heavily damaged cars parked along the road.
On Tuesday, Naval buses were hit by similar roadside bombs in the posh Defence housing authority area and in Baldia killing four people and wounding around 55 people.
The Naval spokesman, Commander Salman Ali said that the bomb was remote controlled and placed near the roadside in a water valve. He confirmed the bus was carrying Naval employees from their homes to their offices and the dockyard.
The blast took place at a time when there was heavy traffic on the Shahrah Faisal road packed with office goers.
Eye-witnesses said as soon as the bomb went off there was panic among the people close by with several vehicles ramming into each other.
Sindh Chief Minister, Qaim Ali Shah said terrorists were now targeting navy buses but security plans would be tightened to prevent more such incidents.
A separatist movement in the Baluchistan province, the Baluch Liberation Front had claimed responsibility for the attacks on the Navy buses on Tuesday. Later, Taliban insurgents also claimed responsibility for the attacks.
A senior police official said fortunately the bomb went off at some distance from a petrol pump which is located near the Naval base.