Local TV showed images of the heavily damaged vehicle, which was part of a convoy of three buses passing through the Halkali district, a suburb on the European side of the city.

"According to initial information, it was a remote-control bomb planted at the roadside," Huseyin Avni Mutlu, Istanbul's governor, said.

"This is a terrorist attack, and the aim of the attack is clear - to create divisions, tensions and despair."

Rising tensions

Al Jazeera's Anita McNaught, reporting from Istanbul, said the attack took place on an open road on the far outskirts of the city, away from any habitation.

She said that about two weeks ago, there was a similar attack on a police bus on the western outskirts of Istanbul, resulting in only minor injuries.

Tuesday's bombing comes as tensions between the Turkish military and Kurdish fighters mount.

Turkish troops killed seven fighters in an overnight gun battle.

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Our correspondent said that the PKK had warned that it would "take the fight to the cities" after 12 of its fighters were killed in clashes with Turkish soldiers on Saturday.

At least a dozen Turkish soldiers have also died in the recent surgeof violence.

Fighting has escalated in the southeast of Turkey, which is predominantly Kurdish, in recent weeks.

Turkish military forces have begun a major deployment along the border with Iraq.

It follows alleged increased infiltration by PKK members into Turkeyfrom the mountains of northern Iraq where thousands of the fighters are based.

The PKK has called off a year-old unilateral ceasefire and announced that it was resuming attacks on Turkish forces.

The group accuses the military of waging attacks and the government of impeding a political resolution of the conflict.

More than 40,000 people, mostly Kurds, have been killed in violence since the PKK launched its armed struggle against the Turkish state in 1984.