
Images showed several mutilated corpses lying on the ground close to the iconic Ottoman-era Blue Mosque in Sultanahmet, a district which is home to Istanbul's biggest concentration of historic monuments.
"I strongly condemn the terror attack which was carried out by a suicide bomber of Syrian origin," Turkish President Recep Tayyip Erdogan said in a speech in the capital Ankara.
Speaking in Berlin, Chancellor Angela Merkel said that German nationals were "probably" among the victims.
"We don't have all the information yet... but we fear that German citizens could be and probably are also among the victims and injured," she told reporters.
Shortly after the blast, Germany had warned its nationals to avoid tourist sites in Istanbul, a city of 14 million that has been hit several times by deadly attacks.
Turkey's Dogan news agency said nine Germans and two Peruvians were among the wounded.
Police and ambulances raced to the scene, throwing up a tight security cordon around the area as helicopters hovered overhead, and crowds of worried locals and tourists clamoured to find out what had happened, an AFP correspondent said.
The explosion took place at around 0820 GMT by the Obelisk of Theodosius, a monument from ancient Egypt which was re-erected by the Roman Emperor Theodosius and is one of the city's most eye-catching monuments.
It stands just outside the Blue Mosque.
Turkey has been on high alert after a series of attacks blamed on the Islamic State jihadist group including a double suicide bombing in October in Ankara that killed 103 people.
The explosion was powerful enough to be heard in adjacent neighbourhoods, witnesses told AFP.
Police cordoned off the area to shocked passers-by and tourists and the
nearby tram service has been halted. ?AFP