The bomber entered the shrine through its Golden gate and blew himself up near the site where the ritual of sufi dance 'Dhamal' was taking place. The attacker first threw a grenade, to cause panic and then blew himself up, police said.
Inspector General of Police for Sindh province AD Khawaja confirmed to media that police had counted 70 dead bodies so far.
"So far 70 people have been killed and more than 150 wounded," he said. The deceased included 12 women and four children.
Earlier, Sehwan police station SHO Rasool Baksh told reporters that around 100 people, including women and children, have been killed in the suicide bomb attack.
Hundreds of devotees were present inside the premises of the vast mausoleum of the saint at the time of blast.
The ISIS claimed responsibility for the attack on their Aamaq news agency, saying a suicide bomber had targeted a "Shiite gathering" at the shrine in Sindh.
Commissioner Hyderabad Kazi Shahid said since the shrine was located in a remote area, some 130 kms from Hyderabad, ambulances and vehicles and medical teams were being sent from Hyderabad, Jamshoro, Moro, Dadu and Nawabshah to the blast site to take care of the injured and move the bodies.
"Emergency has been declared at hospitals in these places and rescue operations have started," he said.
Sindh Chief Minister Syed Murad Ali Shah said that the Pakistan army had been requested to provide night flying helicopters to shift the dead and injured.
"Yes it is a tragic incident and because the shrine is away from a major city there have been problems in providing rescue operations," he said.
The army said a C130 aircraft will be used to lift the injured from Nawabshah.
Prime Minister Nawaz Sharif condemned the attack and urged Pakistan to "stand united". He said the attack on the shrine is an attack on the "progressive and inclusive future" of Pakistan.
"The Sufi people predate Pakistan's history, and played an important part in the struggle for its formation," he said.
"An attack on them is a direct threat to Jinnah's Pakistan and will be dealt as such," Sharif was quoted as saying in a statement released by his media office in Islamabad.
Army chief Gen Qamar Javed Bajwa vowed to avenge "every drop of blood" spilled by terrorists in Pakistan.
"Recent terrorist acts are being executed on directions from hostile powers and from sanctuaries in Afghanistan. We shall defend and respond.
"Each drop of the nation's blood shall be revenged, and revenged immediately. No more restraint for anyone," the Army Chief was quoted as saying by Inter Services Public Relations (ISPR) Director Major General Asif Ghafoor on Twitter.
Devotees gather at the shrine of the revered Sufi saint every Thursday to participate in a dhamaal and prayers.
Television channels reported that dead bodies and injured were lying inside the shrine of Lal Shahbaz Qalandar, a Sufi philosopher-poet of present-day Afghanistan and Pakistan.