"According to initial indications, the explosion occurred as the bomb was being made," Istanbul Police Chief Celalettin Cerrah was quoted as saying on Wednesday.
Police found a mutilated body and an injured man whose arm was blown off when they arrived in the shop in the basement of a building in the Caglayan district on the city's European side, Cerrah said.
Two of the seven injured were in critical condition, Anatolia said.
It was not immediately clear whether the suspected bomber was affiliated to any of the underground organisations active in Istanbul.
Kurdish rebels, as well as left-wing and Islamic extremists have in the past carried out bomb attacks in the city.