Suleyman Soylu told Turkish TV that explosives had been planted in a tunnel dug beneath the police headquarters.
Three people died in Tuesday's blast in the mainly Kurdish south-eastern city.
The outlawed militant group the Kurdistan Workers' Party (PKK) later claimed responsibility for the attack.
In a statement, the PKK was quoted as saying the attack was to avenge the treatment of Kurds, particularly those in jail, by the authorities.
It said its militants had planted the explosives and then returned safely to base afterwards.
Diyarbakir has repeatedly been hit by militants targeting security services, but nonetheless Tuesday's blast was spectacular - leaving a large crater and drawing crowds of onlookers on to the streets.
It ratcheted up tensions four days before a key referendum on granting President Recep Tayyip Erdogan sweeping new powers.
Why is Turkey holding a referendum?
"It turned out that the explosion was the result of a terrorist attack," Mr Soylu was quoted as telling Haberturk television.
"The attack was carried out through a tunnel dug from the outside. They dug a tunnel and placed the explosives in the ground."
He said the surroundings of police buildings were inspected about once a month, so the tunnel must have been dug quickly.
Pictures on Hurriyet news website appeared to show bags of soil stacked atop one another inside the police headquarters.
In a statement, the governor's office said the tunnel was 30m (100 feet) long and its entrance had been in an adjacent building. It said one tonne of explosives was planted.
It said five suspects were detained on Tuesday and a further 172 on Wednesday.
On Tuesday, Mr Soylu said the blast occurred from a vehicle under repair, and appeared to be an accident.
South-eastern Turkey has seen frequent clashes between the PKK and Turkish security forces since a fragile truce collapsed in the summer of 2015.
There have also been bloody attacks in Turkey blamed on so-called Islamic State (IS). The jihadists are hostile to both the Turkish state and the Kurdish rebels, who are battling for territory and influence inside Syria.
Who are Kurdistan Workers' Party (PKK) rebels?
Why is Islamic State group attacking Turkey?
A big explosion in the Turkish city of Diyarbakir which originally appeared to be an accident was actually the result of a terror attack, the interior minister has said.