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8 year oldThey said a man - "according to our current knowledge the perpetrator" - had died in the blast.
The intended target was not clear but about 2,000 people have been evacuated from a nearby open-air music festival, the Bavarian interior ministry said.
It is third attack in the state of Bavaria in the past week.
A shooting rampage in Munich on Friday left nine dead while an axe attack on a train a week ago in Wuerzburg injured several people.
The explosion happened shortly after 22:00 (20:00 GMT) in, or close to, a wine bar that was near the entrance to the music festival, German media reported.
Initial reports suggested it might have been a gas explosion but the Bavarian interior ministry later said the blast appeared to have been intentional.
A police spokeswoman later said the suspected attacker had been carrying a backpack, but his identity was not yet known.
Bavarian Interior Minister Joachim Herrmann was on his way to the scene.
The city's central square is packed with emergency vehicles and a town house is being used as an operations centre, the news website Nordbayern.de said (in German).
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