Police say the bomb went off on Monday while people were boarding the bus. Most of the injured are Ugandans, who were traveling home for Christmas.
"The luggage part of the bus was totally damaged. I have seen at least five wounded people, they were evacuated by paramedics," Robert Chesir, one of the witnesses, told Press TV.
Police officers immediately cordoned off the area and launched an investigation into the incident.
No one has claimed responsibility for the attack, but some blame al-Shabab fighters in Somalia for the blast. The group had threatened to carry out attacks on Uganda and Burundi for their deployment of troops to Mogadishu.
The explosion comes as Ugandan police allege that it has credible information regarding a planned terror attack in Kampala.
In July, Kampala suffered twin blasts that claimed the lives of over 76 people watching a World cup match. The al-Shabab group claimed responsibility for the attacks.