Police official, Ahmed Abdiweli told AFP. "There was a drive-by shooting attack... then a car loaded with explosives was detonated after police reinforcements arrived."
"Most of the casualties are civilians."
Witnesses said that the gunmen target was a Somali government official's car, which they shot, sparking a gun battle with his security escort.
"The gunmen riding in a car attacked the official and there was exchange of gunfire... then there was a huge blast," said Abdi Mudey, who was near Makka al-Mukarama Road where the attack took place.
"I saw several people who were seriously wounded."
AFP reports; There were no immediate claim of responsibility, but Somalia's Shebab insurgents have carried out a string of attacks in the capital.
Expelled from Mogadishu in mid-2011, the Al-Qaeda-linked Shebab still hold swathes of the countryside which they use as launching pads for their attacks.
They are fighting to overthrow the internationally-backed government in Mogadishu, which is protected by a 22,000-strong African Union force.