The blast -- believed to have been carried out by a person of Syrian origin -- was detonated within sight of Hagia Sophia, the city's basilica-turned-mosque, built 1,500 years ago on the orders of Roman emperors.
It's another sign that Istanbul is experiencing the violent spill-over of a civil war that continues to rip Syria -- just next door, but hundreds of miles away from this port city -- apart.
The bombing serves as a chilling reminder of the deteriorating security situation in a country once praised by its Western allies as being a model Muslim democracy for the Middle East.
Turkey is no stranger to acts of political violence; over the past half century, the country has seen attacks carried out by militants from across the political spectrum, from those inspired by Marx to al Qaeda recruits.
But the level of violence has surged over the last year, as the Turkish government finds itself battling two determined enemies simultaneously.
Since the 30-year conflict with the Kurdistan Workers Party, or PKK, re-ignited last summer, scores of people have been killed in clashes throughout south-eastern Turkey.
Turkish security forces have imposed curfews on cities and towns in this predominantly Kurdish region, while engaging in street to street combat with PKK militants who have shifted tactics, and are for the first time trying to capture and hold urban ground.
In the meantime, ISIS fighters have been linked to a series of lethal bombings that have left some 130 Turkish citizens dead in the past six months alone.
Twin suicide blasts killed at least 97 people at a leftist political rally in Ankara
last October, while more than 30 people were killed at a similar leftist gathering by a suspected suicide bomber in the border town of Suruc
In addition to deadly jihadist bombings and a spike in tensions with the country's largest ethnic minority, Turkey is perhaps more politically polarized than ever. The population is very much divided between citizens who love -- or loathe -- President Recep Tayyip Erdogan.
A champion of pious, working class Turks, Erdogan has dominated Turkey's political scene for 14 years. Until recently he presided over a prolonged period of economic expansion.
But the heady days when Erdogan pushed a reformist agenda, lobbying hard to win Turkey's membership in the European Union have faded.
His progressive image has been replaced by the arrest and prosecution of journalists
who dare to criticize the government, strict internet censorship
, and the wholesale sacking of police officers and prosecutors
who had investigated Erdogan's government for corruption. Erdogan denounced the investigation as an "international conspiracy," and blamed social media for fueling anti-government rhetoric.
In the last two months, Turkey has also seen a rupture in relations with one of its largest trading partners: Russia. The Kremlin urged Russian citizens to boycott Turkish beaches and products after Turkish warplanes shot down a Russian bomber flying over the Turkish-Syrian border.
Some of Turkey's current instability is an unfortunate consequence of the government's hospitality to refugees from neighboring Syria.
An open door policy to accept 1.7 million desperate refugees fleeing the conflict in Syria has literally changed the demographic face of many Turkish cities.
Hundreds of thousands of Syrians live in refugee camps, but far more refugees struggle to eke out a living; from palm tree-lined tourist resorts on the Aegean Sea to the ancient cobblestone streets of Istanbul, it has become commonplace to see Syrian children begging for money on the sidewalk.
While allowing refugees to flee the conflict, Erdogan's government also turned a blind eye to jihadi militants entering Syria from Turkish territory for years; the nation now faces the blow-back consequences of that policy.
In recent months, Turkish security forces have begun cracking down on ISIS networks that appear to have taken root across the country.
But those militants are now striking back: With Tuesday's bombing in Sultanahmet Square, they appear to have taken aim at the jewel of a tourism industry that earned Turkey an estimated $34 billion in 2014.
It marks a bloody beginning to what may become a very difficult year.