The blast occurred at around 9pm local time (1900 GMT) Tuesday night in Diyarbakir’s Baglar district where tea gardens attract many locals in the evenings.
It was heard throughout the city, shattering the windows of nearby buildings and opening small cracks in several walls.
The local governor's office identified the cause of the blast as a bomb, without saying who might be behind the attack.
"We heard that terrible bang and then we saw flames rising as high as five metres from the ground," said Hasan Ozcetinkaya, an employee of a gas station across the street.
"I was resting at home when I heard the explosion. I thought it was either an earthquake or I was losing my mind," Mehmet Sanli, a 75-year-old resident of a building next to the park, said.
"I went out barefooted and the street was littered with pieces of glass," she added.
It’s the deadliest blast in a string of bombings across Turkey this year. Pools of blood and covered bodies lay at the site, which was cordoned off by the police. One wounded person was in a serious condition.
Local media said the bomb was planted at a bus stop at the park and most of the victims were people waiting there.
The CNN-Turk news channel said that the bomb was detonated by remote control, possibly a mobile telephone.
In response to the blast, the police have launched an extensive security operation, checking people entering an exiting the city. It is not known who is responsible for the blast.
Kurdish rebellion
A 22 year Kurdish rebellion has taken place in much of southeast Turkey, led by the outlawed Kurdistan Workers' Party (PKK), which has claimed more than 37,000 lives.
The PKK is blacklisted as a terrorist group by Turkey, the European Union and the United States. After calling off a five year unilateral ceasefire in June 2004 it has notably stepped up its violence.
The bomb exploded hours after the arrival in Ankara of a special US envoy who will hold talks with Turkish officials on Wednesday to discuss measures to curb the PKK.
Kurdish militants have also claimed responsibility for 16 bomb attacks across Turkey, including tourist resorts in the west, which killed a total of 12 people and left around 200 others injured.
Other Kurdish militants known as the Kurdistan Liberation Hawks (TAK), has threatened to turn the country into "hell".
It bombed a busy shopping area in the coastal resort of Antalya, killing three people and wounding dozens in August last year. That blast followed four bombs in the Mediterranean resort of Marmaris and in Istanbul that wounded 27 people.
Leftist and Islamist groups have also carried out bomb attacks in the past.