Witnesses said that young women were among the wounded near the Kandawgyi Lake.
|Three explosions rocked Yangon, Myanmar's commercial hub and former capital [Reuters]
Thousands of revellers gather each year in Yangon to usher in the New Year by drenching each other with water.
The military government has not specified the cause of the blast and there were no immediate claims of responsibility.
"Some people were wounded but we are not in a position to give you further detailed information since necessary investigations are still in progress," police said.
Previous bombings have been blamed on dissident groups opposed to the ruling generals and separatist ethnic rebels.
Eleven people were killed and more than 160 wounded when three bombs exploded at a convention centre and supermarkets, in May 2005.
Myanmar, which has been under military rule since 1962, is due to hold elections later this year, but no date has been announced and the generals have been criticised for regulations that prevent Aung San Suu Kyi, the opposition leader, from taking part.
Most of the pavilions on U Htaungbo Road, along the scenic lakeside where the blasts occurred, are run by companies that are said to be close to the authorities.