The blast is being called as the single deadliest attack in Somalia.
Many victims succumbed to death at the hospitals they were admitted in.
Security forces had been tipped off about the vehicle and were pursuing it in the busy K5 district of the city when the explosion happened, CNN quoted Col. Ahmed Hassan of the Mogadishu Police as saying.
However, no group including Al-Shabaab has so far claimed responsibility for the attack.
Speaking to the state-run radio station, Somalia's information minister Abdirahman Omar said the blast was the largest the city had ever seen and "this is how merciless and brutal they are, and we have to unite against them."
President Mohamed Abdullahi Farmajo condemned the attack and has declared three days of mourning in the country.
"Today's horrific attack proves our enemy would stop nothing to cause our people pain and suffering. Let's unite against terror. We will observe 3 days of mourning for innocent victims, flags will be flown at half-mast. Time to unite & pray together. Terror won't win. I call on our citizens to come out, extend help, donate blood and comfort the bereaved. Let's get through this together," President Farmajo said in a series of tweets.(ANI)