The blast went off at the end of a procession for Ashura, the Shi'ite calendar's biggest event.
One witness said he saw body parts on the street believed to be those of the suicide bomber. At least 12 people were wounded.
Security has been beefed up across the country for Ashura, a flashpoint for deadly attacks by Sunni militants in recent years.
Earlier, President Asif Ali Zardari slammed critics and vowed to defend democracy in Pakistan, which faces al Qaeda-linked militants determined to destabilise his pro-American government.
Speaking on the second anniversary of the assassination of his wife, former prime minister Benazir Bhutto, the embattled leader also suggested he had no intention of resigning after the possibility of renewed corruption charges against his close aides further weakened him.
If anyone casts and evil eye on democracy, we will gouge out their eyes, Zardari told supporters of his party in Bhutto's hometown of Naudero in southern Sindh province.
Zardari, who has faced calls for to relinquish some of his powers, did not say which critics he was referring to. It could have been hostile members of the media or the military, the true arbiters of power in the nuclear-armed U.S. ally.
He dismissed speculation he might not survive politically, saying he would swear in a new government after the next election, due by 2013.Earlier in the day, the killing of a district government official and five of his family members in the northwest by what police said were militants was a reminder of the immense challenges facing Zardari.
(Additional reporting by Hassan Orakzai, Javed Hussain, Fais al Aziz and Abu Arqam Naqash; Writing by Michael Georgy; Editing by Robert Birsel)