Provincial law minister Rana Sanaullah said the blast had appeared to target the vegetable market, which was crowded with shoppers.
The Pakistani Taliban claimed responsibility for the attack which targeted officers who were deployed to clear street vendors from an area near the Lahore Technology Park in the centre of the city. The number of killed, according to media, has reached at least 25, while 39 others have been reported injured.
Three motorcylces and a auto were destroyed in the blast whereas registration number of the suspected vehicle was laid out LRB 9308.
Several motorcycles and at least one vehicle were damaged in the explosion.
Hospital sources said that the death toll might further rise as at least 15 of the injured are still in critical condition.
The bomb blast took place near the Arfa Kareem Tower. Forensics teams had also collected evidence from the blast site to determine the nature of the explosion.
The Chief Minister was in meeting at his Model Town office when the blast took place.
Punjab Law Minister Rana Sanaullah, while addressing a press conference, said that the terrorism can not be ruled out as the motive behind the blast.
Local hospitals declared an emergency after Monday's explosion on Ferozpur Road, a main thoroughfare that cuts through the city.
Lahore has been in the centre of terror attacks.
Bomb disposal officers claimed to have found the head of the suicide bomber, adding that around 10-12 kilograms of explosives were used in the blast.