A statement from the police and the local governor's office said 27 people had also been wounded in the explosion near a bus terminal.
The bomb detonated as a special forces' armoured bus passed through the mainly Kurdish city, according to state-run media.
It damaged cars and shattered almost all the windows of a nearby high-rise.
Turkish Prime Minister Ahmet Davutoglu is scheduled to visit the southeastern city on Friday - where some neighbourhoods are under a curfew.
The city has suffered renewed violence since a ceasefire between the outlawed Kurdistan Workers Party (PKK) and the government collapsed last July.
Turkish President Tayyip Erdogan - in Washington for a nuclear security summit - said: "This (attack) shows terrorism's ugly face again. The determination of our security forces will, God willing, put an end to terrorism."
A PKK offshoot has claimed two car bomb attacks this year in the capital Ankara - including one on a military bus that killed 29.
There has been no immediate claim of responsibility following the Diyarbakir blast.
It is the second major attack Turkey has suffered in a fortnight after an apparent Islamic State suicide bomber killed four foreigners in Istanbul.
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