The blast took place during Dhamal a Sufi ritual, when hundreds of devotees were present inside the premises of the vast mausoleum of the saint, police said.
Officials said 12 people were killed in the blast.
Sindh Health Minister Sikandar Mandhro said that "40-50 people" have been injured.
Initial report suggests that it was a suicide bombing on portion reserved for women in the shrine, the Dawn reported, quoting SSP Jamshoro Tariq Wilayat.
"It seems to be a suicide bombing according to initial information provided by Sehwan police to me and I am on way to Shewan," Wilayat said.
Rescue officials said due to the non availability of adequate ambulances at the shrine the toll could rise.
A large number of people visit the shrine on Thursdays.
"Ambulances have been rushed from Hyderabad and other close by places like Nawabshah, Moro, Dadu," Wilayat said.
Sindh Chief Minister Murad Ali Shah ordered immediate rescue operation and government announced emergency in the hospitals of the nearby Jamshooro and Hyderabad districts.
This is the fifth terror attack in Pakistan within a week.
Television channels reported that dead bodies and injured were lying inside the shrine.
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