The explosives-laden car was parked near the office of one of the so-called peace committees that have been formed by local elders trying to rid the area of militants, regional government administrator Fakhruddin Khan said.
It was unclear how many people were in the office at the time, but Khan said those killed included tribal elders and passers-by.
He said 40 people also were wounded and the attack destroyed 35 shops and eight vehicles. The dead and wounded, including some in critical condition, had been transported to hospitals in the northwestern city of Peshawar.
The region, which is in the Khyber Pakhtunkhwa province, is famous for its weapons market selling guns made by local craftsmen.
Provincial Information Minister Mian Iftikhar Hussain blamed the Pakistani Taliban, noting the fundamentalist Islamic movement also had tried to kill a 14-year-old girl who is an advocate of education for girls and a critic of the Taliban. Malala Yousufzai was shot and wounded by a Taliban gunman in the Swat Valley on Tuesday.
The attack has drawn widespread condemnation.
Hussain urged the federal government to consider launching a "decisive operation against terrorists" to eliminate the militants.
"These Taliban have killed our innocent people in so many attacks. They are still killing our people. Instead of wasting time, we should hit them back, and we should do it as early as possible to save the precious lives of our innocent girls like Malala Yousufzai," he told reporters in Peshawar.