The blast near the U.S. Consulate and the Marriott Hotel propelled cars into the air and flung charred wreckage as far as 200 yards. It shattered windows at the consulate and on all 10 floors of the hotel, and damaged a nearby naval hospital.
Bush condemned the attack and said "terrorists and killers" would not prevent him from going to Pakistan on the final leg of his tour of South Asia, CBS News senior White House correspondent Bill Plante reports.
Karachi police chief Niaz Sadiqui said the attacker intended to hit the consulate, but a Pakistani paramilitary guard tried to stop him, so the attacker rammed his car into the diplomat's vehicle instead. The guard also died in the blast.
"We have reached the conclusion that it was a suicide attack, and we have found body parts of the attacker," Sadiqui said.
There was no immediate claim of responsibility for the attack. But previous attacks on Westerners in Karachi have been blamed on al Qaeda-linked Islamic extremist groups. Several suspects have been convicted, but others remain at large.
"We have lost at least one U.S. citizen in the bombing, a foreign service officer, and I send our country's deepest condolences to that person's loved ones and family," Bush said at a news conference in neighboring India without naming the diplomat.
The explosion, which ripped out a crater 8 feet wide and more than 2 feet deep, tore through the parking lot of the Marriott, which is about 20 yards from the consulate. Ten cars were destroyed. A man's body, with part of the head missing, was flung onto the hotel's second story.
The Marriott Hotel's deputy manager, Shahzad Ashif, said Thursday's blast broke windows on all 10 floors and blew out balcony door latches on the first two floors, but no guests were injured. The hotel was being evacuated and guests moved to other hotels, he said.
The diplomat's car was blown into the air, across a concrete barrier and onto the grounds of the hotel. The driver, a Pakistani working for the consulate, also died. The other fatality was an unidentified woman.
"We lost two dear and precious colleagues," Peter Kovach, a U.S. Embassy spokesman, tells CBS Radio News.
A counterterrorism official, speaking on condition of anonymity because he was not authorized to speak to the media, said the attacker used high-intensity explosives, and the attack was the most powerful blast he had seen in Karachi, a hotbed of Islamic militancy.
A Pakistani Foreign Ministry statement said the bombing was a "horrific terrorist attack" and expressed "deep sadness" over the deaths of the American diplomat and his local driver.
"This senseless act today further fortifies our resolve to fight terrorism," the statement said. "We all must work together to eliminate this terrible menace."
Police initially said two car bombs went off, but provincial police chief Jahangir Mirza said a single bomb may have triggered a second smaller explosion in a burning car.