New York Mayor Bill de Blasio called the bombing an "attempted terrorist attack," and identified the 27-year-old man identified as Akayed Ullah.
The blast took place at the height of morning rush hour in the subway station at the new York Port Authority bus terminal, not far from the city's iconic Times Square, sparking commuter panic and travel disruptions.
Subway trains were bypassing the Port Authority and Times Square stations as the investigation continued.
The bomber was in custody and sent to a hospital with burns and wounds on his body.
The explosion rattled a city still scarred by the devastating September 11 attacks, and a truck attack on October 31 that left eight dead on a bike path.
"This is New York. The reality is that we are a target by many who would like to make a statement against democracy, against freedom," New York Governor Andrew Cuomo told reporters.
"This was an attempted terrorist attack," Mayor Bill de Blasio added. "Thank god the perpetrator did not achieve his ultimate goals."
New York police commissioner James O'Neill said the 27-year-old suspect had strapped the explosive device, which resembled a crude pipe bomb, to his body. He suffered burns to the hands and abdomen, and other injuries.
Photos circulating on social media shoed the man on the ground with his hands cuffed behind his back and injuries to his torso.
Former New York police chief Bill Bratton told MSNBC television that he had been told the suspect was originally from Bangladesh and may have been acting in the name of the Islamic State group.
Police quickly evacuated the Port Authority station and closed roads in the area, which were filled with police cars and ambulances with flashing lights.
President Donald Trump was briefed on the explosion, White House spokeswoman Sarah Huckabee Sanders wrote on Twitter.
- 'One of our worst nightmares' -
The city remains constantly on edge as a target of possible terror attacks, and is on high alert ahead of the holidays, which culminate every year with the giant New Year's Eve celebration in Times Square, attended by hundreds of thousands of revelers.
On October 31, Sayfullo Saipov, an immigrant from Uzbekistan, drove a rented truck down a busy bike and pedestrian path, killing eight people and injuring 12.
It was the first deadly terror attack in New York since 9/11, though several plots since then have been disrupted.
Monday's attack highlighted one of New York City's greatest vulnerabilities -- its underground transit system.
A bomb in a subway station "is in many ways one of our worst nightmares," Cuomo said.
"We have the Statue of Liberty in our harbor, and that makes us an international target. We understand that," he added.//AFP