The worshippers were commemorating Ashura, the holiest event on the Shia Muslim calendar, and the parade in Karachi was the biggest in Pakistan.
Pakistan had deployed tens of thousands of police and paramilitary forces, fearing sectarian clashes or militant bombings would target Shia processions.
“It was a suicide attack,” Karachi city police chief Waseem Ahmed told DawnNews.
“Twenty people have been killed and around 40 were injured,” Ahmed said.
Saghir Ahmad, health minister in the government of southern province Sindh, said at least 15 people were killed, but said more than 60 were wounded.
Witnesses said pandemonium broke out after the explosion, with angry mourners throwing stones and firing bullets into the air, restricting the movement of ambulances and sparking calls from the authorities for calm.
Fire broke out after the blast, fanning thick smoke into the sky, and people were running in all directions, an AFP reporter said.
“I appeal on people to vacate the area. This will help us rescue the injured,” said the Karachi police chief.
Prime Minister Yousuf Raza Gilani swiftly condemned the blast and also appealed on the masses to remain peaceful, his office said.
In Karachi, more than 50,000 Shias had poured into the streets to commemorate Ashura.
“It was a huge explosion. We have reports that a lot of people have been injured. I am on site and I appeal to the people to be calm,” Raza Haroon, a cabinet minister in the provincial government of Sindh, told a private television channel.
It was the second bomb attack to mar Ashura commemorations in Pakistan after a suicide bomber blew himself up outside a main Shia mosque in Pakistani-administered Kashmir, killing seven people late Sunday.
Sectarian violence periodically flares in Pakistan between Shias and Sunnis.
Explosives planted in a gutter ripped through an Ashura procession in Karachi on Sunday wounding 17 people, officials said.
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