Media reports said the authorities were studying the possibility the explosion was caused by a suicide bomber but there was no official confirmation.
Turkey is on edge after a series of deadly attacks by ISIS including a double suicide bombing in the capital Ankara in October that left 103 people dead.
The blast reportedly took place at 8.20am GMT around the Obelisk of Theodosius, a monument from ancient Egypt which was re-erected by the Roman Emperor Theodosius and is one of the city’s most eye-catching monuments.
A German tourist named Caroline added: ‘The explosion was so loud, the ground shook. There was a very heavy smell that burned my nose.
Terror attack: Bodies litter a square after an explosion ripped through the Sultanahmet district of Istanbul, the city’s main tourist hub
Horror: The blast rocked the Sultanahmet neighbourhood in central Istabnul which is visited by tens of thousands of tourists every day
Police cordoned off the area to shocked passers-by and tourists and the nearby tram service has been halted amid fears of a second blast