There has been a series of bomb attacks in recent weeks
Local police say the bomb, which was in a plastic bag on a bicycle, was detonated by a timing device.
Correspondents say the area was crowded with unemployed labourers seeking work.
Most of those who died were killed instantly, while more than 40 have been injured and are being treated in local hospitals.
Attackers unknown
It is not yet clear who is behind the attack.
The chief of the Sialkot district police, Muhammad Tahir, told the BBC that five people - all of them labourers - had been killed instantly in the blast.
Hospital authorities in Sialkot said that eight of the 40 wounded had sustained serious injuries.
Mr Tahir told the AP news agency that a sixth labourer died on his way to hospital.
On alert
Pakistani security forces are currently on alert across the country for possible attacks as tensions rise over Pakistan's decision to support possible US military action against Afghanistan.
Sialkot is about 40km (25 miles) from Pakistan's border with India, just south of the disputed region of Kashmir.
Muslim separatist guerrillas are battling Indian forces in Indian-controlled Kashmir.
India accuses Pakistan of training and supporting the rebels. Pakistan denies helping them but says it backs self-determination for the people of Kashmir.
Series of blasts
Wednesday's attack in Sialkot is the latest in a series of blasts in Punjab, Pakistan's largest province.
Fourteen people have died in less than six weeks. Last month, a time device exploded in a motorcycle rickshaw in Gujarat city killing seven people, including a couple and their three children.
Nobody has accepted responsibility for the attacks.