A group of fighters opened fire on the building before detonating a bomb at the Criminal Investigation Department (CID) compound, leaving a crater of about 12 metres across and four metres deep in front of the site.
Pakistani Taliban swiftly claimed responsibility for what was a rare attack on government security forces in Karachi, a politically tense city of 16 million in the south of the country, far removed from Taliban strongholds in the northwest.
Witnesses and police said the CID building collapsed, trapping people under the rubble.
Rescue workers at the site were ferrying people on stretchers into ambulances, while dazed civilians stumbled into the street amidst a mass of twisted metal.
Police said the compound was used to detain high-profile criminals. It also contained a women's and a men's police station whose nearby residential quarters were also badly damaged.
Rising death toll
Al Jazeera's Kamal Hyder, reporting from Islamabad, said that the death toll was likely to rise.
"The CID office is a highly secured area that is frequented by a lot of important people," Hyder said.
Semi Jamali, a doctor at Karachi's Jinnah Hospital said more than 100 people were wounded and that one police woman was among the dead.
A Reuters photographer on the scene saw dozens of motorcycles destroyed and windows were shattered up to 2km away. He also saw two wounded children evacuated from the scene.
Amir Lateef, a local journalist, told Al Jazeera that at least 10 police officers were killed in the blast.
"We can see cars turned into wreckage, the building turned into complete rubble. Lots of people are injured, including women and children," he said.
"[The attackers] came in a car. First they engaged police by opening fire. Then they hit the building with the car full of explosives," Zulfiqar Mirza, the interior minister of the southern province of Sindh, said.
"It was a huge blast, which created a big crater, a bit like the Islamabad Marriott hotel," he added, comparing the explosion to a massive attack that killed 60 people at the five-star Marriott hotel in Islamabad in September 2008.
Al Jazeera's Imran Khan, reporting from Karachi, said that the blast comes after the launch of new Pakistani army operations in the northwest.
"Investigators will be looking for clues as to what type of explosive was used," our correspondent said.
Around 3,800 people have been killed in suicide attacks and bombings, blamed on homegrown Taliban and other armed groups across Pakistan, since government troops stormed a radical mosque in Islamabad three years ago.
The Karachi bombing came less than a week after a suicide bombing on a mosque packed with worshippers killed 68 people in northwest Pakistan.
That attack on Friday in the Darra Adem Khel region, was followed hours later by a grenade assault on a second mosque in the same area that killed four people.
The US wants Pakistan to do more to stop fighters from crossing into Afghanistan and fuelling a nine-year Taliban uprising against more than 150,000 US-led Nato troops.
Karachi has already suffered its most serious bout of political violence in years, with 85 people killed after a politician was shot dead in August.
The city is Pakistan's economic capital, home to its stock exchange and a key port where Nato docks its supplies ready to be trucked overland to support the war in Afghanistan.
Source: Al Jazeera and agencies