The incident comes amid a number of Palestinian attacks on Israelis, majority stabbings.
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The bus appeared to have been empty at the time, the police said, with the wounded apparently on another bus situated next to it.
A police spokesman told Israeli Channel 2 television that investigators were still trying to determine who had planted the bomb.
“There is no doubt that this was a terror attack”, Jerusalem police commissioner Yoram Halevy said.
In a first reaction to the bombing, Israeli Prime Minister Benjamin Netanyahu said Israel will find and punish the people responsible.
At least 21 people have been injured in a bus explosion in Jerusalem, according to the Israeli emergency service Magen David Adom (MDA).
“I always pushed it aside”, Tzadok Bondy told reporters regarding Jerusalem’s terror attacks.
It was a stark reminder of an attack method commonly used during last decade’s Second Intifada, but which has since become rare as so-called lone-wolf attackers have assaulted Israelis using simpler weapons, such as knives, guns and cars.
A total of 28 Israelis and two Americans have been killed in the seven-month wave of violence. Israel says most of the Palestinians killed were attackers, with the rest killed in clashes with security forces.
The injuries are believed to have been sustained by passengers on another bus besdie the vehicle that exploded.
A bus bombing would mark a significant escalation in the violence.
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The Gaza Strip-based Palestinian terror group Hamas praised the attack in a statement.
