Police and bomb disposal squad have reached the spot.
While speaking to Express News, SSP Imran Shaukat said a low-intensity explosive device was planted near Ghareeb Nawaz Hotel and was the cause of the blast.
Earlier police had said a cracker was thrown at the hotel.
The blast was loud enough to be heard in far away areas and has damaged nearby shops.
The injured have been shifted to a local hospital and few of them are reportedly in critical condition.
The area has been cordoned off and security officials are collecting evidence from the blast site.
Earlier, two Rangers personnel and a traffic police officer were killed while a third Rangers official sustained injuries in an attack by unidentified armed men on Al Asif checkpost near Superhighway on December 10.
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