It is understood that a Syrian national carried out the attack, in the Sultanahmet district, close the popular tourist site of the famous Blue Mosque.
Ten people died in the blast, and a further 15 were injured, many of them also German.
President Recep Tayyip Erdogan said Turkey was the "top target for all terrorist groups in the region", the BBC reported.
The news is the latest blow to the country’s tourism industry, which contributes around 12% of Turkey’s total GDP, according to the World Travel and Tourism Council.
It follows reports from UK agents that suggested British tourists were already choosing to stay away from Turkey amid terrorism fears.
Barrhead Travel chief executive Sharon Munro told TTG that Turkey was down 52% for the company so far this year compared with the same period in 2015.
Personal travel advisor Jenny Jackson said she had also noted that customers seemed to be actively staying away from both Turkey and Egypt’s red sea resorts.
David Scowsill, president and chief executive of WTTC said: “It is important to reiterate that tourism is a force for good, and that people will not stop traveling in the face of these isolated incidents around the world.
“Governments must continue to ensure that appropriate security measures are in place, to facilitate travel for business and leisure purposes.”
Tourists killed in Turkey bomb blast
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