At least 40 people were wounded in the blast.
Most of the casualties were inside a bus plying the route No. 255 between the towns of Mount Lavinia and Kottawa.
It was not clear whether the bomb went off inside the bus, as originally described by the military, or on the road.
The road has been closed for traffic. It was the second bomb attack in the capital this week.
A bomb exploded on a rail track as a train bound for Colombo was passing through a southern suburb of the city, injuring more than a dozen people Wednesday.
Last week, an explosion inside a train on the same track killed nine persons.
The attacks have been blamed on Tamil Tigers.
Updated