A group calling itself Tehrik-i-Taliban Punjab claimed responsibility for the bombing in a Turkish-language posting on websites, saying it was related to the fight in Swat, according to the Site intelligence group that monitors such internet postings.
The claim could not be verified and the group's relationship with the Taliban was unclear.
Military campaign link
Rehman Malik, Pakistan's interior minister, said the attack was in revenge for the government's offensive against the Taliban.
"I believe that anti-Pakistan elements, who want to destabilise our country and see defeat in Swat, have now turned to our cities," he said.
Pakistan's army has for weeks been battling Taliban fighters in the Swat region of the North West Frontier Province (NWFP).
The ISI is not directly involved in the fighting in Swat, but is responsible for gathering intelligence to support the operation.
Al Jazeera's Mike Hanna, reporting from Islamabad, said that there was a fear the attack was linked to the military offensive.
"This is the first attack in Punjab province since the [military's] campaign began about a month ago," he said.
"There had been speculation that there would be some retaliation, although we don't know at this point who is responsible [for the Lahore attack]."
Wednesday's blast was the third major attack in Lahore, Pakistan's second-largest city, in recent months.
Mosharraf Zaidi, a Pakistan-based political analyst, told Al Jazeera: "The speculation is that this is the Taliban, but it could be one of many other groups that have been operating in this country for the last while."
|The group claimed that the blast was linked to the fighting going on in the Swat valley
He said that targeting Lahore, rather than Peshawar, the NWFP's provincial capital, could be an attempt to exploit ethnic divisions in Pakistan.
In the Swat valley, meanwhile, there has been no respite for residents from violence.
The Pakistani military claimed on Wednesday to have taken back Mingora, the valley's main city.
Hameedullah Khan, an Al Jazeera producer and one of the first journalists in the area, said: "The military are saying they have killed 268 Taliban in Mingora city and they said the militants have fled to the mountains, upwards."
While shops and buildings have been destroyed, he said the destruction did not appear to be as bad as feared by Mingora's residents - most of whom had fled the fighting.
"Mingora is totally calm now, there's no one in the city. You will find only the military men standing alert on the streets of Mingora," he said.