Twenty other people were injured in the attack. The attacker was among the dead.
Governor Vasip Sahin said the explosion occurred outside a local government office on Istiklal Street, which is also home to cafes, restaurants and foreign consulate buildings.
Sahin said one of wounded victims died in hospital. The private Dogan news agency said at least three of the injured are Israeli nationals.
Police sealed off the area and a forensic team was at the scene. Turkey was already on edge following two recent suicide car bomb attacks in the capital, Ankara, which were claimed by a Kurdish militant group, which is an off-shoot of the outlawed Kurdistan Workers' Party, or PKK.
The most recent attack, on March 13, targeted a line of bus stops on Ankara's busiest street and killed 37 including two bombers.
"It was one loud explosion," said Muhammed Fatur, a Syrian who works at a butcher shop near the scene of today's explosion.
"Police came to the scene and sealed off the area."
Turkey had heightened security in Ankara and Istanbul in the run-up to a Kurdish spring festival of Newroz on March 21, which Kurds in Turkey traditionally use to assert their ethnic identity and demand greater rights.