Saeed Illahi, adviser to the province's chief minister, confirmed Mr Khanzada's death. Two police officers - including a deputy superintendent - died in the blast as well. Rescue work is going on to retrieve the people trapped under the building which collapsed due to the bombing.
There were up to 40 people in the compound when the suicide bomber blew himself up, causing the entire roof slab to fall in one piece, complicating rescue efforts.
Nobody has claimed responsibility for the attack yet, but Mr Khanzada had been active in crackdowns on sectarian militants and Taliban insurgents in Punjab.
A retired colonel, Mr Khanzada was holding a meeting, when the bomber managed to enter and blow himself up. "The hall collapsed in the blast and over three-dozen people including the minister were trapped in the rubble," Punjab Law Minister Rana Sanaullah told reporters.
It was not known immediately how the bomber gained access to the building.
Mr Khanzada had assumed charge of home ministry in October 2014 and has been actively involved in major operations against terror outfits in the province.
Considered a vocal opponent of terror, he had received threats from Al-Qaeda and Tahreek-i-Taliban Pakistan.
Over the last one year, Pakistani authorities have cracked down on the myriad insurgent groups that have plagued the country for a decade.
The offensive intensified after Taliban gunmen slaughtered more than 130 children at a school in the northwest of the country in December.