Pakistani police said on Saturday the explosives were hidden in a car that blew up in a parking area about 1km (0.6 miles) away from a club where hundreds of people were gathering for a concert by the Indian singer Sonu Nigam, police said.
A 23-year-old man was killed and nine passers-by were injured, witnesses and doctors said. The dead and injured had been on their way to the concert.
At least four vehicles were also damaged, witnesses said.
No group has claimed responsibility for the bombing, but police at the scene said they suspect Islamic extremists were behind it.
Hard line Islamic groups are opposed to the recent thaw in Pakistan's relations with traditional rival India and cultural exchanges between the two countries.
Faizan Yaqub, one of the injured, said he parked his vehicle and was walking towards the club when he heard a loud explosion. "I fell on the ground and that's all I can remember," Yaqub said.
Namir Muhammad, a witness, said he saw people running for cover after the explosion. "It was a complete chaos," he said.
Police said the vehicle used in the bombing had been stolen at gun-point by two unidentified men earlier on Saturday.
Sayyid Kamal Shah, the police chief, said the concert was continuing undisturbed.
Karachi, a teeming city of more than 14 million people, has seen a spate of suicide bombings and attacks on Westerners, government officials and religious minorities in recent years.
Police blame most of these attacks on Islamic militants, furious at the government's support for the US-led "war on terrorism" after the 11 September 2001 attacks.
Earlier on Saturday, Pakistani security forces said they had foiled a major attack attempt in Karachi after recovering a huge cache of weapons and explosives in two separate raids.
No arrests were made.
The raids were part of an anti-terror campaign that has gained momentum since police defused a massive car bomb outside the US Consulate in Karachi last month.
Police say scores of suspected militants have been arrested and have provided tips about the locations of weapons dumps.