There was no immediate confirmation of the nationalities of the casualties, but Israel's foreign ministry said the blast had targeted a bus carrying Israeli tourists who had just landed at the port city of Burgas on the Black Sea.
"All the signs point to Iran," Prime Minister Benjamin Netanyahu said in a statement, which claimed this was the latest in a string of attempts to attack Israelis in Thailand, India, Georgia, Kenya, Cyprus and other places.
Netanyahu noted that the attack fell on the 18th anniversary of a 1994 attack on a Jewish community centre in Buenos Aires that killed 85 people and wounded around 300, which Israel blamed on Iran.
"Israel will respond forcefully to Iranian terror," Netanyahu warned.
Defence Minister Ehud Barak said Israel had been monitoring attempts by groups such as Lebanon's Hezbollah, Gaza's ruling Hamas movement, and Iranian and Jihadi operatives to attack Israelis, and vowed to hunt down the perpetrators.
"The security establishment will act with all its strength to get to those who carried out this attack and those who sent them," he said.
He later discussed the "brutal terrorist attack" with his US counterpart, Leon Panetta, his office said.
Bulgarian Foreign Minister Nikolay Mladenov telephoned his Israeli counterpart Avigdor Lieberman and told him the blast, which killed seven, was caused by a bomb planted on a bus, the Israeli ministry said.
"Minister Mladenov updated Minister Lieberman saying that the explosion was caused by a bomb which was planted on a bus which was carrying tourists from a charter flight which had arrived from Israel," it said.
"On the flight were 154 travellers including one American citizen, an Italian citizen, a Slovakian, eight children and a baby.
"At the scene of the incident there are six bodies, and an additional person who was critically wounded, died in hospital," the statement quoted Mladenov as telling Lieberman.
"Two people who were seriously wounded are in intensive care. In addition, there are 30 other people receiving treatment," he said, indicating that an investigation was under way.
The bus was carrying 47 people who had just arrived on a plane from Israel, the Bulgarian ministry said.
Israel's foreign ministry said the attack targeted a group of tourists who had just arrived on a flight from Tel Aviv shortly before 5:00 pm (1400 GMT).
"What we know is that there are casualties and probably not only injured but also dead. We know that some were Israelis but we don't know if all of them were," deputy spokeswoman Ilana Stein told AFP.
Israeli media reports said many of those on the flight were young Israeli school-leavers who were just about to be drafted into the military.
Speaking to Israel's army radio, two Israeli tourists who were at the scene described the moment the blast occurred.
"I was on the bus and we had just sat down when after a few seconds we heard a really loud explosion," Gal Malka told the station by phone from the airport, saying the explosion took place just outside the front of the bus.
"The whole bus went up in flames," she said.
Aviva, another Israeli woman who was on a nearby bus, said she heard a "very loud explosion" and described seeing at least seven dead bodies.
"There are seven dead people," the woman told the radio, adding that she saw people whose clothes had been blown off by the blast and bodies lying on the floor.
"It was just terrible; people were jumping out of the windows," she said.
The foreign ministry said four of its diplomats had been flown to Sofia to help manage the situation, and several medical teams were also preparing to fly out to Burgas.
The Israeli military said it was about to send a plane carrying a medical team to Bulgaria "in order to provide medical care and to assist those injured in returning to Israel," a statement said. The team would include doctors specialising in trauma, orthopaedics, intensive care, surgery, burns and paediatrics.
And medics from Israel's Magen David Adom emergency services were also preparing to fly out to help with the treatment and repatriation of wounded Israelis, the organisation said.
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