The bomb exploded in Mogadishu’s Medina neighborhood, said Wadajir district commissioner Ahmed Addow. He said the street where the blast happened is regularly used by government officials.
Hundreds of onlookers gathered as medical officials treated the wounded.
The city’s airport and the main base for the 9,000-strong African Union force are located in Medina, which is generally considered the safest area in the capital.
The African Union supports the weak U.N.-backed government, and in recent weeks AU troops have been pushing al-Qaida-linked al-Shabab insurgents out of the last district in the capital that al-Shabab controls.
Kenyan soldiers have also entered Somalia from the south to fight al-Shabab. The East African nation blames the group for a string of attacks and kidnappings in Kenya, including those of four Europeans. The Kenyan government says the kidnappings threaten tourism, a key source of revenue for the country.
In return, al-Shabab has threatened to attack Kenya’s capital with suicide bombings. Somalia has not had a functioning government since the ouster of longtime dictator Siad Barre in 1991 by warlords who then turned on each other.
Residents also reported Ethiopian troops had entered Somalia over the weekend, potentially opening a third front against the insurgents.