Sixty-eight others were injured in the explosion which occurred as a military vehicle was passing on a road in the city centre, some 100 metres (yards) from a military base and billets, governor Huseyin Avni Mutlu told reporters here.

He said the car bomb was set off by remote control and that a security operation was under way in the city to catch the perpetrators.

Four of the injured were badly wounded, Mutlu added.

Hospital sources said the wounded include soldiers and civilians and high school students attending private lessons at a nearby building.

Media reports suggested the dead could all be students.

It was not immediately clear who was behind the attack, but Diyarbakir has been targeted repeatedly by Kurdish rebels fighting a separatist campaign that has raged since 1984.

Speaking in Ankara, Turkish Prime Minister Recep Tayyip Erdogan condemned the blast as a "terrorist act."

"Terrorism has reared its ugly head again. But these incidents will not affect our determination to fight terrorism both at home and abroad," he said in televised remarks.

Police said they were looking for two people witnesses saw flee the scene, but it was not immediately clear whether they were suspects.

The blast destroyed the military vehicle and five cars and ignited a large blaze later extinguished by fire fighters.

Police threw a security cordon around the scene and kept reporters away, saying this was a precaution against a possible second explosion.

Bomb experts on the scene looked for clues as a large crowd gathered nearby, an AFP correspondent saw.

Diyarbakir has been at the heart of a bloody 23-year separatist conflict in southeast Turkey between government forces and the outlawed Kurdistan Workers' Party (PKK) that has cost more than 37,000 lives.

PKK rebels have claimed responsibility for several bomb attacks in Diyarbakir and other major cities in the past.

Seven people were injured in June when a bomb exploded near a bus stop in central Diyarbakir. Officials blamed the attack on the PKK.

In 2006, 10 people, including seven children, were killed and 14 injured in a bomb blast at a crowded city park, which officials blamed on the PKK.

Thursday's blast came as the Turkish army stepped up action against PKK rebels who use neighbouring northern Iraq as a springboard for attacks on Turkish targets.

The general staff has confirmed three air strikes on PKK positions in northern Iraq since December 16, in addition to a cross-border land operation to stop a group of rebels from infiltrating Turkey.

Officials in northern Iraq have reported two other air raids.

At least 150 militants have been killed and more than 200 PKK positions destroyed in the raids so far, according to the Turkish military.

The PKK is listed as a terrorist group by Ankara and much of the international community.