State television said 70 people were wounded, several critically. The British-based Syrian Observatory reported 9 dead civilians and 3 security men and said the death toll was likely to rise.
Pro-government Al-Ikhbariya television showed firefighters running through thick smoke after the blast in Marjeh Square. Two bodies could be seen on the ground.
The target of the attack was not immediately clear. Footage showed the former interior ministry building near the site of the blast on one of the capital's main roads.
Monday's attack on the prime minister's convoy killed six people in what has become an increasingly common tactic used by rebels.
A resident of Damascus, who lives 1.7 km (1 miles) from the blast site, said the explosion shook the doors of her house. "It must be huge for me to hear it like that. Casualties must be horrific because it is a super busy square at this time of day," she said over Skype.
Rebels have increased their attacks on Damascus, which include mortar fire from the contested suburbs, in a civil war that has cost more than 70,000 lives according to UN estimates. A bomb in July killed four of President Bashar al-Assad's aides, including his brother-in-law Assef Shawkat and the defence minister.
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