The bombing at the entrance to the highly-fortified embassy in an upmarket area of the capital on Friday was the latest in a series of attacks on missions in the Muslim world, highlighting the vulnerability of the country's 70,000 diplomats.
The White House strongly condemned the bombing, saying it was "clearly an act of terror" while saying it did not know yet who was responsible.
However Turkish Prime Minister Recep Tayyip Erdogan said the bomber was a member of the Revolutionary People's Liberation Front (DHKP-C), a radical left-wing group blamed for several attacks since the late 1970s including suicide bombings and attacks on prominent figures.
"It is definitely DHKP-C," Erdogan told the Haber-Turk television network, but he declined to provide further details before DNA test results were available.
Local media reported that the bomber was a DHKP-C member who had been jailed after a 1997 attack at a military compound in Istanbul.
NATO Secretary General Anders Fogh Rasmussen "strongly condemned" the "outrageous attack on the diplomatic premises of one ally, on the territory of another ally."
The bombing showed "a reckless disregard for human life and for the inviolability of diplomatic staff," he added in a statement.
US officials said tightened security at the American embassy in Ankara had helped save lives.
Two weeks ago, Turkey carried out a major nationwide crackdown on the DHKP-C group, which is branded a terrorist organisation by the United States and the European Union, and which most recently claimed a suicide bombing that killed a police officer in Istanbul on September 11.
DHKP-C is vehemently anti-US and anti-NATO, and despises the Turkish establishment.
However there was no immediate claim of responsibility for what was the latest of many bloody attacks in Turkey. In the past officials have blamed Kurdish militants, leftist extremists or Al-Qaeda linked groups.
Friday's bombing came on the last day of Hillary Clinton's tenure as US secretary of state, and a week after NATO declared that a battery of US-made Patriot missiles went operational on Turkey's border with war-torn Syria.
The force of the blast damaged nearby buildings in the Cankaya neighbourhood of the capital where many other state institutions and embassies are also located.
Police cordoned off the area, while a police helicopter hovered above and armed US Marines patrolled the embassy roof.
Television footage showed a wounded woman with a blood-stained face being carried into an ambulance on a stretcher.
The Turkish foreign ministry strongly condemned the attack as a "hostile act of terror targeting democratic values defended by Turkey, the United States and other allies."
US ambassador Francis Ricciardone vowed to work with Turkey to fight terror, confirming the death of the Turkish security guard.
The embassy warned US citizens to avoid its diplomatic missions in Turkey until further notice and to avoid potential troublespots and demonstrations.
In September, the US ambassador to Libya and three other people were killed when dozens of heavily-armed Al-Qaeda-linked militants overran the US consulate in the eastern city of Benghazi and a nearby CIA-run annex.
French Foreign Minister Laurent Fabius and his British counterpart William Hague were among those to condemn the Turkish bombing, the latest targeting Western diplomatic missions in the country.
Predominantly Muslim Turkey, a close US ally and NATO member, has become a fierce critic of the regime of President Bashar al-Assad since the uprising erupted in March 2011 and called for the deployment of the Patriot missiles after several cross-border attacks.
In July 2008, three gunmen and three Turkish policemen were killed in an attack outside the US consulate in Istanbul.
In November 2003, four suicide car-bomb attacks on two Istanbul synagogues, the British consulate and British bank HSBC killed 63 people, including Britain's consul general. They were claimed by an Al-Qaeda cell.
Friday's attack also came as the Turkish government is negotiating with leaders of the outlawed Kurdistan Workers' Party (PKK) to resolve the three-decade Kurdish conflict.
The insurgency by Kurdish rebels seeking autonomy in the southeast has claimed 45,000 lives, most of them Kurdish.
The PKK, which is regarded as a terrorist group by Ankara and its Western allies, had stepped up its attacks last year, usually targeting Turkish security forces.