More than 30 people were wounded in the attack against tourists headed for Bulgarian Black Sea resorts that also left two nearby buses in flames.
Witnesses described how panicked passengers jumped from bus windows and bodies lay strewn on the ground with their clothes torn off as ambulance sirens wailed and black smoke rose over Sarafovo airport in Burgas.
Bulgaria's Prime Minister Boyko Borisov said "this terrible incident is a shock to us all... The government condemns the aggression and terrorism".
Israel said it had been informed by Bulgaria that seven people were killed, while Bulgarian interior ministry officials in Sofia put the death toll at six, with 32 wounded.
Israeli Prime Minister Benjamin Netanyahu said that "Israel will respond forcefully to Iranian terror" after an official in Jerusalem said the bus was shot at and an explosive thrown.
"In the past few months we have seen attempts by Iran to harm Israelis in Thailand, India, Georgia, Kenya, Cyprus and other places."
The foreign ministry's deputy spokesman Paul Hirschson told AFP that "the vast majority of the dead and the injured are Israelis," although the nationalities of the casualties had not been listed.
The attack -- the deadliest on Israelis abroad since 2004, and the first on Bulgarian soil against Israelis -- drew strong condemnation from its staunchest ally the United States, as well as from France and Britain.
US President Barack Obama condemned the "barbaric terrorist attack".
Obama did not mention Iran in his written statement but reaffirmed America's "unshakeable commitment to Israel's security, and our deep friendship and solidarity with the Israeli people."
"My thoughts and prayers are with the families of those killed and injured, and with the people of Israel, Bulgaria, and any other nation whose citizens were harmed in this awful event," he said.
"These attacks against innocent civilians, including children, are completely outrageous. The United States will stand with our allies, and provide whatever assistance is necessary to identify and bring to justice the perpetrators of this attack."
Obama called Netanyahu and expressed his condolences, while both leaders "agreed that Israel and the United States would work together to investigate the attack," said an Israeli government statement.
Netanyahu told Obama that Iran and Hezbollah were waging a global terror campaign, the statement said, and he told the US president that "Iran is a state of global terror. It must bear the consequences of that."
Pictures from Burgas showed plumes of black smoke rising over the airport, which was closed after the attack. Television showed ambulances rushing people to hospital and women crying.
"I was on the bus and we had just sat down when, after a few seconds, we heard a really loud explosion," one Israeli tourist, Gal Malka, told Israeli army radio. "The whole bus went up in flames."
Aviva, another Israeli woman on a nearby bus, told the radio that "there are seven dead people," adding that she saw people whose clothes had been blown off and bodies lying on the floor.
"It was just terrible. People were jumping out of the windows," she said.
The Israeli military said it was sending a medical team to Bulgaria "in order to provide medical care and to assist those injured in returning to Israel," a statement said.
Burgas mayor Dimitar Nikolov, who was at the airport at the time, said the blast happened as tourists were boarding the bus and placing their bags in the luggage compartment.
The blast occurred around 1400 GMT on the bus carrying Israelis who had flown in to Burgas, the second largest city on Bulgaria's Black Sea coast, setting off a fire that spread to another two buses, the ministry said.
Israeli media said many on the flight were young Israeli school-leavers who were just about to be drafted into the military.
The attack came on the 18th anniversary of an attack on a Jewish community centre in Buenos Aires in 1994 that killed 85 people and wounded 300.
Israel also held Iran responsible back in 1994. The Islamic republic denied the charge and has accused Israel of being behind the assassinations of nuclear scientists and senior military figures in recent years.
Bulgaria's Black Sea coast has become a popular holiday spot for Israelis, with almost 140,000 visiting the country in 2011.
In January, Israeli public television reported that Bulgarian authorities had foiled a bomb attack when they found an explosive device on a bus chartered to take Israeli tourists to a ski resort.
Bulgarian troops were deployed in several ski resorts frequented by Israeli tourists after the bomb was found, the report added.
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