“We have confirmed eight casualties who have all been rushed to hospital,” Nairobi police chief Moses Nyakwama told AFP.
“The explosion was caused by a roadside bomb which had been placed in a hole in the ground by the roadside,” he added.
The blast, which occurred at around 7:30pm local time (1630GMT) with the streets crowded as people returned home from work, reportedly happened near a supermarket in the largely ethnic Somali neighbourhood of Eastleigh.
Three of those wounded are in a critical condition, Kenya Red Cross officials said.
“No arrests have been made yet, and investigations are already under way,” Nyakwama added.
Just last month at least seven people were killed and many more wounded in a bomb attack on a bus in the same district.
Kenya has suffered a string of attacks often blamed on Al-Qaeda-linked Shabaab militants since it sent its troops, now integrated into an African Union force, into Somalia.
The troops seized the Shabaab bastion of Kismayu in September, a key southern Somali port, prompting warnings of retaliation from both the insurgents and their Kenyan supporters.
No one had claimed responsibility immediately for the attack Wednesday, and the Shabaab have denied involvement in previous similar attacks.
Violence in Kenya – ranging from attacks blamed on Islamists to inter-communal clashes to a police crackdown on a coastal separatist movement – have raised concerns over security ahead of elections due in March 2013.
Five years ago, elections descended into deadly post-poll killings that shattered Kenya’s image as a beacon of regional stability.
Last month, riots broke out in Nairobi’s Eastleigh district after a bus was bombed, with running street battles between demonstrators and the police.