It was the insurgents' first major attack since US President Donald Trump announced in Washington late Monday that he was committing American troops to the war-torn country indefinitely.
"A suicide bomber detonated an explosive-filled car in a parking lot near the main police headquarters in Lashkar Gah," Omar Zhwak, a spokesman for the governor of Helmand province, told AFP.
"Our initial information shows that five civilians were killed and 25 were wounded, including women and children," he added.
He added that a nearby mosque, which was being used as a madrassa or Islamic religious school, had been been damaged. Children were studying there at the time.
"We have received 38 wounded -- mostly schoolchildren -- and five dead, including two women and two soldiers," Mauladad Tabihdad, director of hospitals in Helmand, told AFP.
The attack occurred a little over 24 hours after Trump cleared the way for thousands more US soldiers to be sent to Afghanistan, reversing earlier pledges to pull out.
The Taliban quickly claimed today's attack in a text message sent to journalists.
"We targeted army tanks, killing dozens," it read.
Ordinary Afghans have paid a heavy price for the 16-year US-led war.
Civilian deaths are at their worst since records began in 2009. In the first half of the year, 1,662 civilians were killed and more than 3,500 injured, according to the United Nations.
The attack was also the latest blow to Afghanistan's beleaguered security forces.
The resurgent Taliban have been ramping up their campaign against government forces, underscoring rising insecurity in Afghanistan during the summer fighting season when the warmer weather tends to spur an increase in attacks.
Afghan police and troops -- beset by a high death toll, desertions and non-existent "ghost soldiers" on the payroll -- have been struggling to beat back the insurgents since US-led NATO troops ended their combat mission in December 2014.
More than 2,500 Afghan police and troops were killed from January 1 to May 8.
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