It appeared to be the first attack targeting foreigners in a recent wave of violence. CBS News has learned that an al Qaeda cell run by a tribal militant leader in Pakistan's Waziristan region along the Afghan border is emerging as the prime suspect in the bomb attack.
A Turkish woman died in the blast, Pakistani Interior Secretary Kamal Shah said. Police could not immediately confirm the identity of the second person killed.
A spokeswoman for the U.S. Embassy said embassy personnel are among the injured, but she was unable to say how many.
The British Foreign Office reported that a staff member from the British High Commission had been "lightly injured" in the blast. The man was being treated in a hospital, a spokesman for the foreign office said, speaking anonymously in line with department policy.
Police have not determined whether the bomb was planted in the Luna Caprese's back garden or whether a suicide bomber attacked the restaurant, said police officer Irshad Abro.
The blast rang out across downtown Islamabad around 8:45 p.m. local time. The restaurant was crowded with a group of Americans and Chinese nationals, said restaurant employee Hagi Mal.
"I was working in the kitchen when the blast took place on the lawn. Something hit me on the shoulder," Mal said.
Fire engines and police raced to the scene, which was littered with blood and debris. A man's shoe lay in a pile of rubble.
Local television footage showed a wounded man, looking dazed, rushing past the camera with blood streaming from his forehead.
Zahid Janjua, a student at the city's International Islamic University, was dining nearby at another restaurant. He helped bring victims to waiting ambulances, staining his clothes with their blood.
"It was chaos. Broken tables and chairs lay scattered across the lawn. There were eight or nine people lying injured and crying for help," he said.
After inspecting the destruction, city police chief Shahid Nadeem Baloch told reporters that 11 people were wounded: eight foreigners and three Pakistanis, a couple dining and a waiter. He gave no further details of their identities.
"There is a crater in the ground which suggests that it was a planted bomb, but we need to investigate further," Baloch said.
"The initial information tells us that there are al Qaeda's fingerprints all over the place. They have not only the history, but the motive to attack a restaurant where western nationals are frequent customers on a Saturday night," said a senior Pakistani security official who spoke to CBS News correspondent Farhan Bokhari on condition of anonymity.
The official said Baitullah Mehsud, a Pakistani tribal militant with links to Al Qaeda appeared to be the prime suspect in initial investigations. Mehsud is suspected by both Pakistani and U.S. officials for his alleged role in the December 27, 2007 assassination of Benazir Bhutto, the former prime minister, when she was attacked just minutes after she emerged from a political rally in Rawalpindi, a suburb of Islamabad.
The 54-year-old Harvard and Oxford educated Ms. Bhutto was widely seen to have returned to Pakistan from exile last October with U.S. backing, to reclaim her legacy as a pro-western and liberal political leader.
The Pakistani security official who spoke to Bokhari said Saturday's attack followed reports in the last two months suggesting that Mehsud had already dispatched several of his loyalists to different parts of Pakistan to carry out suicide and bomb attacks.
"This latest attack is the kind of thing we were already expecting somewhere. Obviously no one could ever tell where this was going to happen next," said the Pakistani security official.
A second senior Pakistani security official who also spoke to CBS News on the condition of anonymity, said, "the principal suspect is Baitullah Mehsud because we know this is the kind of thing he would like to do. Mehsud is widely known to have built up the capacity for carrying out such attacks."
A senior western diplomat warned that Saturday's attack will make it harder for President Pervez Musharraf or the country's newly elected politicians who are likely to take charge in about a week's time, "to pretend that they are capable of taking charge across Pakistan just as bombers are taking this upper hand."
The bomb struck two days before Pakistan's new parliament was set to convene Monday. On Tuesday, two suicide bombings killed 24 people and wounded more than 200 in the eastern city of Lahore.
With such attacks on the rise, a growing number of Pakistanis are questioning U.S.-backed President Pervez Musharraf's approach to countering al Qaeda and the Taliban. Musharraf's opponents say punitive military action has only fueled the violence.
The winning parties in last month's parliamentary elections have pledged to form a new counterterrorism strategy when they form a new coalition government next week.
Pakistan government officials said after the bombing, high profile restaurants across Pakistan - especially those frequented by foreigners - had been warned to take added precautions against unexpected bombs. Security was also doubled around high profile hotels frequently used by western visitors.