The blast struck the minibus in the Lashkar Gah-Sangin district in Helmand province on the main road running from the city of Kandahar to Herat, said Daoud Ahmadi, a spokesman for the Helmand governor's office.
He said four others were wounded in the blast and that the dead included women and children.
The bus was transporting people to a local bazaar, said Ghulam Haidar, who arrived at the scene after learning that two of his brothers had been killed.
"There was a huge blast ... body parts were scattered far away" from the bus, he said.
Haidar said he took his cousin and a child who was on the bus to a local hospital. He learned that the child later died.
President Hamid Karzai condemned the bombing as a "blood thirsty" attack, saying in a statement that the explosive was "planted by the enemy of the Afghan people."
Helmand is one of the Taliban's strongholds in southern Afghanistan. It has been the scene of some of the fiercest fighting in the war and an area where NATO has poured in troops in a bid to quell the insurgency.
Last week, the Helmand governor's office said five civilians were killed during a firefight between militants and NATO forces in the province's Sangin district. Seven insurgents were killed in that battle.
While NATO's push in the south has put pressure on the Taliban there, the international coalition has also been forced to contend with an increase in insurgent attacks elsewhere in the country, where an uptick in violence has raised questions about NATO's claims of major progress in the war.
In an attack on one of the few calm provinces, the Taliban fired two rockets into Bagram Air Field, the main U.S. base in Afghanistan. Master Sgt Jason Haag, a NATO spokesman in Kabul, said "two rounds of indirect fire" hit Bagram.
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