Israel's internal security minister Yitzhak Aharonovitch told reporters Wednesday afternoon that the blast was caused by a bomb outside Jerusalem's central bus station at 3pm.
No-one has claimed responsibility for the huge explosion shook buildings hundreds of metres away.
Medical officials quoted earlier by Israel's Channel 2 television said four of the injured were in serious condition, and another two were moderately hurt.
The target was the 174 bus which was headed for Maaleh Adumim, a sprawling Jewish settlement which lies just to the east of Jerusalem.
Earlier in the day two Grad rockets hit the Israeli city of Beersheva, as armed groups in Gaza promised reprisals for the deaths of eight Gazans in Israeli raids.