Images from the site showed bloodied bodies lying on the carpeted mosque floor surrounded by shards of glass, debris and panicked worshippers.
Dozens more wounded were lying in the garden outside the mosque as people called for help.
Bombings are rare in the heavily-guarded capital, although Pakistan has been hit by a rising wave of militancy in the past few years.
The explosion hit the mosque during Friday prayers, police official Zafar Iqbal said.
"I can't say how many are dead at this moment, but yes, people have died."
Two police officials said the attacker was stopped at the gate of the mosque before detonating the bomb. They asked not to be identified as they were not authorised to speak to the media.
A suicide bombing on November 11 killed 12 people in Islamabad and wounded 27 others in an attack Pakistan said was carried out by an Afghan national. No group claimed responsibility for the attack.
Shi'ites, who are in the minority in the predominantly Sunni Muslim nation of 241 million, have been targeted in sectarian violence in the past, including by the Sunni Islamist militant group Tehreek-e-Taliban Pakistan, which considers them heretics.
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