Tehran Radio said the blast, at noon local time, injured four people, although other sources put the figure nearer 20.
The Iranian news agency Irna said no group had claimed responsibility for the explosion, the second this year. In January two bombs placed in rubbish bins near a busy intersection injured at least three.
Police said at the weekend that they had arrested 17 people in connection with the explosions and an earlier shooting incident at the British embassy. Some of the suspects, they said, confessed to links with the Iraqi-based opposition Mujahedin Khalq. Referring to Iran's Islamic government, a Mujahedin spokesman told Reuters in Nicosia: 'Such criminal acts, which only endanger the lives of innocent people, serve the interests of the mullahs' regime.'
Iran has blamed Iraq for explosions in Tehran and other cities in recent years.