Sunday's blast destroyed the bus, parked in front of the headquarters of the air carrier of the Himalayan kingdom, Royal Nepal Airlines, in the center of the city. The bus had been scheduled to depart for western Nepal.
Witnesses say three men were seen getting off the vehicle moments before the blast and were heard warning that a bomb was on board. There were conflicting reports about how many people were aboard, when the explosion occurred.
There have been no claims of responsibility, but police immediately blamed Maoist insurgents for the attack.
The Maoists have stepped up violence across the countryside and in Katmandu since abandoning peace talks last August amid a disagreement over the the future of the monarchy.
Maoist rebels have been fighting since 1996 to overthrow the monarchy and establish a communist government. The insurgency has claimed more than 9,500 lives.
Nepal's monarchy has been in turmoil since June 1, 2001, when Nepal's crown prince apparently shot to death his parents, the king and queen, and seven other members of the royal family before turning the gun on himself.
Riots shook Katmandu after the massacre, followed by weeks of mourning. Soon after, fighting intensified between government forces and rebels who wanted to turn the country into a country modeled after Mao Zedong's China.
Some information for this report provided by AP and AFP.