Several pickup trucks carrying bodies arrived at the nearby General Sani Abacha Specialist Hospital, a hospital source said, adding: "There are also many casualties in the emergency room."
It was not immediately clear if anyone had been killed, or how many people had been injured. A Reuters witness near the scene heard a loud boom, and some residents said they also heard a second explosion.
Police Commissioner Marcus Danladi confirmed the explosion, adding that police were still trying to gather information.
Damaturu is the capital of Yobe state, an area that has been devastated by attacks from militant Islamist group Boko Haram, which in April abducted more than 200 girls from a school in neighbouring Borno state.
The Nigerian government has advised residents to avoid gathering in public to watch the World Cup, concerned about possible attacks.
Earlier this month, a bomb blast targeting another informal venue in northeast Nigeria where football fans had gathered killed at least 14 people and wounded 12.
Such assaults on the often-ramshackle television viewing centres have raised fears militant groups will target supporters gathering to cheer on the global football contests.
Many fans in soccer-mad Africa rely on informal venues - often open-sided structures with televisions set up in shops and side streets - to watch live coverage of the sport.
Boko Haram - whose name roughly translates as "Western education is sinful" - has declared war on all signs of what it sees as corrupting Western influence.
The group has killed thousands since 2009 in its push to carve out an Islamic state in Nigeria's restive north.
(Writing by David Dolan; Editing by Robin Pomeroy and Jonathan Oatis)
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