"Police tried to intercept a woman sitting on a motorcycle with a terrorist. She blew herself up and after that there was another blast when a suicide attacker sitting in a car exploded," Liaqat Ali Khan, the city police chief, said.
"An attack had happened here already once before ... We don't feel secure here, we don't know when it will happen again," Allah Ditta, a local resident, said.
Hasan Askari Rizvi, a political and defence analyst, said: "Different terrorist groups are now trying to reassert themselves, because after the [Pakistani army] Swat operation and the death of Baitullah Mehsud, [the leader of the Pakistani Taliban] the impression was that they were in disarray.
"Now they want to demonstrate they are capable of taking action in any part of the country.
"They want to deter [security forces] from taking action in South Waziristan where action is expected against the Taliban."
Meanwhile, Pakistani forces attacked the Taliban in their South Waziristan stronghold on Friday with aircraft and artillery.
A day earlier, 40 people died in a string of attacks on security buildings in Lahore and bombings in the northwest.
The government says a ground offensive against the Pakistani Taliban in South Waziristan is imminent and the army has been stepping up its air and artillery attacks in recent days to soften up their defences.
Also on Friday, police said dozens of people had been picked up in overnight raids in slum areas of Lahore and neighbourhoods populated by Afghans.
"There has been considerable progress in the ongoing investigation. We have arrested dozens of suspects during overnight raids in Lahore," Haider Ashraf, senior police official at the Manawan police academy, told the AFP news agency.
"These people are being interrogated. We are also trying to identify the terrorists who were killed yesterday," he said.
The US hopes that a Pakistani army operation in South Waziristan will help break much of the militant network that threatens both Pakistan and American troops across the border in Afghanistan. But the Pakistani army has given no time frame for the expected offensive.
It has reportedly already sent two divisions totalling 28,000 men and blockaded the area. Analysts say that with winter approaching, any push would likely have to begin soon to be successful.