Authorities said the blast, which occurred at a park in the poor Baglar area of the city, was probably detonated using a mobile phone timer.
At least five of the dead were reported to be children.
The blast came as a US envoy arrived in Turkey for talks on curbing a wave of bombs blamed on Kurdish separatists.
Bomb attacks in tourist resorts and other cities in recent weeks have killed a total of 12 people and wounded dozens.
One separatist militant group, the Kurdistan Freedom Falcons (Tac), has said it carried out those attacks.
It also warned on its website last week that it would turn "Turkey into hell".
Shattered
The explosion happened at about 2100 local time (1800 GMT) at a park popular with locals in an area of the city largely populated by Kurdish migrants.
The local governor's office said it suspected a bomb had been set off, but that investigations were continuing.
Police cordoned off the site as rescue workers converged on the scene.
Upsurge in violence
Diyarbakir, the central city of Turkey's south-east, is a heartland of Kurdish separatist militancy.
The district mayor is from the Kurdish DTP political party, says the BBC's Sarah Rainsford in Istanbul, which recently called on the outlawed Kurdish separatist group the PKK to announce a ceasefire following an upsurge in violence in recent weeks.
The Tac group, which is said to be linked to the PKK, called on foreign tourists not to travel to the country following recent attacks.
Retired US air force General Joseph Ralston will meet Turkish officials in Ankara on Wednesday for talks on the Kurdish issue.
Ten people, 7 of which are children, are dead, and at least 17 injured as a bomb went off in , Turkey. Police say that the bomb was set off by a timer on a mobile phone. The blast happened inside a park in the Baglar region of Diyarbakir.

A group called the Kurdistan Freedom Falcons or TAC has claimed to be responsible for the blasts. The group threatened Turkey last week when it posted a message on their website saying that they would turn the country "into hell."

"Our grief is great for the victims of this terror, especially as our children have been the victims," said Recep Tayyip Erdogan, the Turkish Prime Minister.