Police spokesman Eric Kiraithe said anti-terrorism police were combing the blast site in the city centre for clues. Earlier, the police commissioner had suggested that a massive electrical fault might be to blame.
More than ten people have been killed in a string of attacks in Nairobi, the capital, and the port city of Mombasa since Kenya sent troops into Somalia in October to fight al-Qaeda-linked militants.
Nairobi has blamed the al-Shabaab militants – who merged with al-Qaeda earlier this year – for the surge in violence and kidnappings that has damaged tourism in east Africa’s biggest economy and threatens wider regional destabilisation.
In a statement, Mr Kiraithe said: “The investigating team is exploring the possibility that the blast was caused by criminals using an improvised explosive device.”
Two shopkeepers said they saw a man drop a bag inside the trading centre moments before the blast.
Irene Wachira said: “He came into the shop twice, looking at T-shirts. He said he didn’t have money so he left. Then he came back. [He was] three shops away from where I was. He left a bag and a few moments later we had an explosion. The roof caved in and debris started falling on us.”
Prime minister Raila Odinga said Kenyans would not be cowed by “terrorists”.
A spokesman for Kenya Power, the country’s sole electricity distributor, said initial investigations had ruled out any electrical malfunction.
Dense black smoke initially billowed through the building’s collapsed roof and sirens blared as emergency service crews rushed to Moi Avenue, a major road running through the city.