Television footage showed an injured woman with a blood-stained face being carried into an ambulance on a stretcher.
Predominantly Muslim Turkey is a close US ally and a member of the North Atlantic Treaty Organisation.
The blast comes barely a week after NATO declared that a battery of US-made Patriot missiles went operational on Turkey’s border with war-torn Syria on Saturday.
Turkey, led by Prime Minister Tayyip Recep Erdogan, has become a fierce critic of the regime of President Bashar al-Assad since the uprising erupted in March 2011.
Foreign missions in Turkey have been targeted in the past.
In July 2008, three gunmen and three Turkish policemen were killed in an attack outside the US consulate in Istanbul.
In November 2003, four suicide car-bomb attacks on two Istanbul synagogues, the British consulate and British bank HSBC killed 63 people, including Britain’s consul general.
The bombings were claimed by an Al-Qaeda cell.
Friday’s attack also comes as the Turkish government is negotiating with leaders of the outlawed Kurdistan Workers’ Party (PKK) to resolve the three-decade Kurdish conflict.
The insurgency by Kurdish rebels seeking autonomy in the southeast has claimed 45,000 lives, most of them Kurdish.
The PKK, which is regarded as a terrorist group by Ankara and its Western allies, had stepped up its attacks last year, usually targeting Turkish security forces.
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