Zahedan is the capital of Sistan-Baluchestan province which borders both Afghanistan and Pakistan.
 
It has been hit by a string of attacks and kidnappings blamed on Jundallah (Allah's brigade), a Sunni group.
 
The governor said one of those behind the blast was killed in the incident, suggesting a total toll of 12, but he did not make this clear.
 
Five arrests
 
A spokesman in the Zahedan governor's office said five people have been arrested.
 
Witnesses in the city said motorcyclists had shot at the bus to force it to stop.
 
IRNA's correspondent in Zahedan said some people were seen placing a booby-trapped car in the path of the bus and detonated the explosives when the bus drew near.

The bomb, a standard Iranian Peykan model, was apparently detonated by remote control.
 
Fars news agency said four people were in the car which seemed to have broken down on the road.
 
It said when the bus approached, the four fled on motorbikes and the car exploded.
 
Iranian officials have accused Britain and the US of supporting ethnic minority rebels operating in the Islamic republic's sensitive border areas.