The explosion occurred just after 10:00 local time (08:00 GMT) in the city's historic Sultanahmet district, close to the Blue Mosque.
Fifteen people were also wounded in the blast, the Istanbul Governor's Office said in a statement on its website.
Some reports suggest the explosion was caused by a suicide bomber.
Police have sealed off the area and the authorities are investigating the type of explosive used, the governor's office said.
(BBC News)