The explosion happened in Guvenpark in the Kizilay district, a key transport hub and commercial area.
Several vehicles at the scene were reduced to burned-out wrecks, including at least one bus.
Last month, a bomb attack on a military convoy in Ankara killed 28 people and wounded dozens more.
The Hurriyet newspaper said the latest blast happened at about 18:41 (16:41 GMT) and the area was evacuated in case of a second attack. Many ambulances were at the scene, it added.
No group has yet claimed the attack.
Prime Minister Ahmet Davutoglu was reported to be convening an emergency security meeting.
President Recep Tayyip Erdogan, who has been in Istanbul, was briefed on the attack by the interior minister, Hurriyet reported. Mr Erdogan was expected to return to Ankara later.
“According to initial reports, 27 of our citizens were killed in a blast caused by a bomb-laden car at Kizilay’s Guvenpark,” the governor’s statement said.
It added that 23 people had died at the scene while four others died on their way to the hospital.
The BBC’s Mark Lowen in Istanbul says three attacks in the Turkish capital in less than six months show the multiple security threats that Turkey now faces.
The country that was the stable corner of the Middle East and the West’s crucial ally in a volatile region is now at a dangerous moment, he adds.
Last month’s bombing was claimed by a Kurdish militant group, the Kurdistan Freedom Hawks (TAK). It said on its website that the attack was in retaliation for the policies of President Recep Tayyip Erdogan.
Turkey, however, blamed a Syrian national who was a member of another Kurdish group.
Last October, more than 100 people were killed in a double-suicide bombing at a Kurdish peace rally in Ankara.