"It was a bomb planted by the Taliban to hit security forces but... it got a passenger bus," Farah provincial police spokesman Muhibullah Muhib told AFP.
There was no immediate confirmation from the Taliban that they were responsible for the blast.
Afghanistan's largest militant group is very active in the region and often uses improvised explosive devices (IEDs) against Afghan and foreign forces.
The passenger bus began its journey in the western city of Herat and was driving towards the Afghan capital.
The explosion happened as it travelled through Bala Baluk district of Farah at 4:30 am (0000 GMT), provincial governor spokesman Naser Mehri told AFP.
Around a dozen of the wounded — mostly members of the Hazara ethnic group — were taken to a hospital in Herat.
Most of them were suffering from head injuries and broken bones, Ibrahim Mohammadi, a doctor at the hospital, told AFP.
Among the wounded was Mohammad Zahir, 40, who had been travelling with his newly married daughter to visit relatives in Kabul.
"The bus was driving on the main road when I heard a big bang," Zahir told AFP.
"When I woke up I found myself in the hospital. I still don´t know what´s happened to my daughter."
A photo posted on social media purportedly of the bus showed the vehicle's blackened shell and dozens of Afghan men at the scene.
Some were peering inside the bus, while others were walking through the wreckage.
A number of emergency vehicles could be seen in the photo.
Civilians have borne the brunt of the 17-year conflict and IEDs, such as remotely detonated or pressure-plate bombs, are one of the main causes of casualties.
Such IEDs caused 877 civilian casualties in the first half of 2018 — 232 deaths and 645 wounded — accounting for 17 percent of overall casualties, the latest UN figures show.
A total of 1,692 civilians were killed in the conflict during the first six months of this year.
That was the highest number of fatalities for the period since the United Nations Assistance Mission in Afghanistan began keeping records in 2009.
Militant attacks and suicide bombs were the leading causes of death.
Another 3,430 people were wounded in the war, down five per cent from the same period last year, the report said.
The Taliban has a heavy presence across western Afghanistan, particularly in Farah. It launched a major attempt to take over the provincial capital in May, triggering intense fighting with US and Afghan forces.
After a day-long battle, the Taliban fighters were forced to the outskirts of the city.
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