US Ambassador Francis Ricciardione told reporters that a guard at the gate was killed in the 1:15 pm blast. A Turkish citizen and an embassy worker were wounded. Turkish Interior Minister Muammer Guler told reporters that the suicide bomber was also believed to have been a Turkish citizen.
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State broadcaster TRT said Turkish police suspected the suicide bomber belonged to a far-left militant group.
The bomber, about 30-years-old, used plastic explosives in the attack. He is believed to have spent time in prison on terrorism-related charges and was a member of the Revolutionary People's Liberation Party-Front (DHKP-C), TRT said.
The US State Department said it was working with Turkish officials to investigate the deadly explosion. "We are working closely with the Turkish national police to make a full assessment of the damage and the casualties, and to begin an investigation," department spokesperson Victoria Nuland said in a statement.
Nuland called the explosion "a terrorist blast."
In comments broadcast live by Turkish television, Turkish Prime Minister Recep Tayyip Erdogan called for a global effort to combat "terrorist elements."
The bomb appeared to have exploded inside the security checkpoint at the side entrance of the embassy, but did not do damage inside the embassy itself. Footage showed that the door had been blown off its hinges and debris littered the ground and across the road. An Associated Press journalist saw a body in the street in front of an embassy side entrance.
Police swarmed the area and several ambulances were dispatched. An AP journalist saw one woman who appeared to be seriously injured being carried into an ambulance.
The police official, who spoke on condition of anonymity in line with government rules, said police had examined security cameras around the embassy and had identified two people who could have been the suicide bomber.
Television footage showed a door blown out and masonry from the wall around it scattered in front of the side entrance, although there did not appear to be any more significant structural damage to the building.
"It was a huge explosion. I was sitting in my shop when it happened. I saw what looked like a body part on the ground," said travel agent Kamiyar Barnos whose shop window was shattered around 100 metres away from the blast.
Several people injured (Photo: AP)
Damage caused to building (Photo: EPA)
The embassy building is heavily protected. It is near an area where several other embassies, including that of Germany and France, are located. Police sealed off the area and journalists were being kept away.
There was no claim of responsibility, but Kurdish rebels and Islamic militants are active in Turkey. Kurdish rebels, who are fighting for autonomy in the Kurdish-dominated southeast, have dramatically stepped up attacks in Turkey over the last year.
As well, homegrown Islamic militants tied to al-Qaeda have carried out suicide bombings in Istanbul, killing 58, in 2003. The targets were the British consulate, a British bank and two synagogues.
In 2008, an attack blamed on al-Qaeda-affiliated militants outside the US Consulate in Istanbul left three assailants and three policemen dead.
AP and Reuters contributed to this report