A powerful blast rocked the Sultanahmet neighbourhood, which is home to Istanbul's biggest concentration of monuments and is visited by tens of thousands of tourists every day.
Turkey is on edge after a series of deadly attacks blamed on the Islamic State jihadist group including a double suicide bombing in the capital Ankara in October that left 103 people dead.
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Ambulances and police were despatched to Sultanahmet, the city's main tourist hub, which is home to world-famous monuments including the Blue Mosque and the Hagia Sophia.
"Investigations into the cause of the explosion, the type of explosion and perpetrator or perpetrators are under way," the Istanbul governor's office said in a statement quoted by the Dogan news agency.
It said 10 people were killed and 15 wounded.
Images published by Dogan showed several apparently dead bodies lying on the ground.
Media reports said the authorities were studying the possibility the blast was caused by a suicide bomber but there was no official confirmation.
The explosion was powerful enough to be heard in adjacent neighbourhoods, witnesses told AFP. Police cordoned off the area to shocked passers-by and tourists and the nearby tram service has been halted.
"The explosion was so loud, the ground shook. There was a very heavy smell that burned my nose," a German tourist named Caroline told AFP.
"I started running away with my daughter. We went into a nearby building and stayed there for half an hour. It was really scary," she added.
Media reports said the blast took place at 0820 GMT around the Obelisk of Theodosius, a monument from ancient Egypt which was re-erected by the Roman Emperor Theodosius and is one of the city's most eye-catching monuments.
Turkey is on alert after 103 people were killed on October 10 when two suicide bombers blew themselves up in a crowd of peace activists in Ankara, the bloodiest attack in the country's modern history.
That attack was blamed on Islamic State (IS) jihadists, as were two other deadly bombings in the country's Kurdish-dominated southeast earlier in the year.
Turkish authorities have in recent weeks detained several suspected IS members, with officials saying they were planning attacks in Istanbul.
But Turkey is also waging an all-out assault on the outlawed Kurdistan Workers' Party (PKK) which has staged dozens of deadly attacks against members of the security forces in the southeast.
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