Videos posted on Twitter, purportedly from Chabahar, showed thick smoke rising from the area. There was no immediate claim of responsibility.
A suicide vehicle bombing was followed by an armed assault in Chabahar, Iran.
A suicide bomber has set off an explosion outside a police station in the Iranian southern port city of Chabahar, killing at least three people and wounding 48, state TV has reported.
Terror attacks in Shiite Iran are rare, but militants have stepped up action in recent months.
Rahmdel Bameri, a provincial official, told state TV that a suicide attacker driving a vehicle loaded with explosives drove up to the police headquarters.
"As we've made clear in the past, such crimes won't go unpunished: In 2010, our security services intercepted & captured extremists en route from UAE", Zarif said in what appeared to be a reference to the 2010 capture of Sunni insurgent leader Abdolmalek Rigi.
Chabahar is a key port city on the Gulf of Oman about 100 kilometers west of Iran's border with Pakistan.
Chabahar lies in Sistan-Baluchistan province which has always been a flashpoint, with Pakistan-based Baluchi separatists and Sunni Muslim extremists carrying out cross-border attacks targeting the Shiite authorities.
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Washington has granted exceptions to some United States sanctions on Iran for the project.
India is developing the Chabahar port along with Iran and Afghanistan.
Pakpur also said several hours after the explosion that calm and security had returned to the city of Chabahar.
Meanwhile, Iranian Foreign Minister Mohammad Javad Zarif claimed that those behind the attack were backed by foreign countries and would be brought to justice.
Citing Afghanistan's economy, the U.S. last approved a sanctions exemption for Chabahar when it re-imposed a second round of bans against Iran months after its withdrawal from a 2015 multilateral deal with Iran, which is officially known as the Joint Comprehensive Plan of Action (JCPOA).
An Iranian ethnic Arab separatist Sunni militant group and Islamic State both claimed responsibility for that attack.
"Foreign-backed terrorists kill & wound innocents in Chabahar".
Meanwhile, Foreign Ministry spokesman Bahram Qassemi also denounced the "malicious and inhumane terror attack, which he said was aimed at disrupting Iran's economic development, which is underway in cooperation with regional states".