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The Taliban described Superintendent Chaudhry Aslam's death as a "huge victory". Prime Minister Nawaz Sharif condemned the bombing.
Three other officers were killed alongside Aslam, said senior police officer Raja Umar Khattab, after a car packed with explosives rammed his vehicle.
Chain-smoking Aslam, dubbed "Pakistan's toughest cop" by local media and a celebrated figure in a country where citizens decry authorities' failure to crack down on criminals and militants, has been targeted by the Taliban before.
In 2011, the militant group rammed his house with a huge car bomb, killing eight people but leaving his family unscathed.
"I will not be cowed. I will teach a lesson to generations of militants," he said at the time, adding that he had already survived eight other attempts on his life.
Karachi police chief Shahid Hayat praised Aslam's courage, adding: "We have given hundreds of lives in the line of duty to save this city."
Police regularly pick up a dozen bodies a day in Karachi, home to 18 million people and one of the world's most violent cities. Around 200 police officers were killed there in 2013.
In recent years, the Taliban has expanded its influence in the city, especially in areas dominated by ethnic Pashtuns fleeing fighting along the Afghan-Pakistan border.
POLICE ACCUSED OF ABUSES
Last year, Aslam helped conduct a bloody but ultimately failed operation to arrest a man wanted for 63 murders in one of Karachi's most notorious slums. Five police and 20 civilians died, but the suspect was giving press interviews at his home shortly afterwards.
Aslam, whose bathroom was filled with rocket propelled grenades, rejected criticism of his police force when he spoke to Reuters in an interview in 2012.
But human rights advocates said police, frustrated by low conviction rates, were involved in extra-judicial executions, allegations also made by the Taliban.
"We were working for a long time to eliminate him as he killed and tortured many of our people in Karachi," said Taliban spokesman Sajjad Mohmand from Mohmand Agency in the tribal areas.
"We trained this (suicide bomber) especially to eliminate him. It's a huge success for our people." He said the Taliban would continue to target other officers on a hit list.
Karachi police said Aslam's unit had killed three suspected Taliban on Thursday morning.
Aslam often complained about the lack of funding, training and equipment for Pakistan's police, contributing to conviction rates of less than 10 percent of those apprehended. Judges often throw out cases where evidence has not been properly gathered.
This year's federal budget gave the military about $6 billion and the police $686 million. Many officers do not have enough bullets for their weapons, have no training in evidence gathering and do not earn enough to support their families.