Gov. Hüseyin Avni Mutlu said two of the wounded were in critical condition following the early morning attack. The state-run Anatolia agency said the dead included the 17-year-old daughter of an officer.
The outlawed Kurdistan Workers' Party (PKK) terrorists have repeatedly staged bomb attacks in İstanbul in the past but the last major bomb attack in the city was in 2007, when 17 people were killed.
The PKK terrorists have dramatically stepped up their attacks on Turkish targets this month and had threatened to expand their war to cities in the west of the country.
The roadside bomb went off on a usually quiet side road as the bus passed shortly after leaving a military housing complex, NTV television said.
The terrorist Kurdistan Freedom Faclons (TAK), believed to have links with the outlawed Kurdistan Workers' Party (PKK) said it was behind the roadside bombing and warned civilians to stay away from army targets, according to a statement carried by Firat News Agency.
Turkish troops killed seven terrorists in the country's north and southeast in two separate clashes overnight, the Anatolia agency said. The terrorists have killed at least 13 soldiers in the region since Friday.
The PKK is considered a terrorist organization by the United States and the European Union.
The escalation of violence seriously threatens to derail the reconciliation process, with each attack fueling nationalism and deepening anger on both sides.
The terrorist PKK have used northern Iraq as a springboard to stage hit-and-run attacks on security forces in their decades-long campaign. The Turkish military says around 4,000 terrorists are based just across the border in Iraq and that about 2,500 operate inside Turkey.
Turkish warplanes often have bombed terrorist hideouts there, and troops have crossed the border to hunt the terrorists down. The last major ground incursion into Iraq was in February 2008, but the terrorists made a comeback after the troops withdrew.
Turkey's military chief, Gen. İlker Başbuğ, on Monday did not rule out the possibility of a new major cross-border offensive.
