The explosion occurred during Fajr prayers near the eastern gate of the shrine in Pakpattan, 190 kilometres from Lahore, DawnNews reported.
The bomb was planted in a milk container on a motorcycle, city police chief Mohammad Kashif told Reuters by telephone.
“According to initial reports, two unidentified men dressed in shalwar kameez came on the motorcycle and parked it near the gate minutes before the blast,” he said.
The explosive device was remote-controlled.
At least a 100 people have been reported to be present at the time of the blast. The injured were taken to the District Headquarters hospital in Pakpattan. At least eight injured people were said to be in critical condition.
According to the Regional Police Officer, the shrine was shut down following the blast and security forces had cordoned off the area.
There was no immediate claim of responsibility for the latest attack but Taliban militants have in the past attacked Sufi shrines.
The chairman of the Ruet-i-Hilal Committee, Mufti Muneebur Rehman said the government had failed to provide adequate security to shrines in Pakistan.
In one of the deadliest strikes, a bomb blast in July at the Data Darbar in Lahore killed more than 40 people.
Eight people, including two children, were killed in an attack at the Abdullah Shah Ghazi shrine in Karachi on October 8. —Agencies