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A low-intensity timed device went off as the procession neared a Shia prayer hall on Wednesday evening.
Two suicide bombers then blew themselves up among the panic-stricken marchers.
Twenty-eight people were killed instantly and nine more died later in hospital, officials were quoted as saying by TV news channels.
Over 280 people were injured though many of them were sent home after being given first aid, officials said.
The blasts were the latest in a series of attacks targeting religious minorities and shrines in Lahore.
Ninety-five members of the minority Ahmedi sect were killed when suicide attackers stormed two mosques in Lahore in May while 45 died when two suicide bombers blew themselves up in the famous Data Darbar shrine in July.
People in Lahore expressed shock and disgust at the blasts targeting a religious procession.
Most major markets were closed due to an impromptu strike called by traders as a mark of protest.
Authorities have made strict security arrangements for the funeral of the dead and additional security forces were deployed at important installations across the city.
Reacting violently to the blasts, people in the Shia procession attacked a police building, set public property and cars on fire and fought with police for nearly two hours last night.
The rioters were dispersed after authorities called in the paramilitary Pakistan Rangers to control the situation.
Deputy inspector general of police (operations) Rao Sardar Ali Khan told the media that two suicide bombers had blown themselves up when they were stopped at barriers by policemen.
At least seven policemen were injured, he said.
Though a group called Lashkar-e-Jhangvi al-Almi told the local media that it had carried out the blasts, senior Tehrik-e-Taliban Pakistan commander Qari Hussain claimed responsibility for the attacks in an audio message issued late last night.