"The bomb was apparently planted in a motorcycle. At least 16 people have been injured," Abdul Waheed, a police official told AFP.
Waheed said bomb disposal experts were examining whether the device was timed or detonated by remote-control.
No group has yet claimed responsibility for the bomb attack.
A second police official confirmed the blast and told AFP that the condition of one of the injured was critical.
Since the Tehreek-e-Taliban Pakistan (TTP) rose up against the Pakistani state in 2007, more than 6,800 people have been killed in bomb and gun attacks across the country, according to an AFP tally.
Rawalpindi neighbours the capital Islamabad.