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"It was a suicide attack. The teenage bomber came on foot and was wearing a school uniform," senior police officer Abdullah Khan said. He said 27 army personnel were killed and 40 others injured, most of them critically.
An army spokesman confirmed the incident but put the casualty toll at 20.
Police said the condition of some of the injured was critical and the toll could go up.
The hit on the Punjab Regimental Centre was one of the worst strikes on the Pakistan army deeply involved for last two years in operations in the restive Khyber-Pakhtunkhawa province bordering Afghanistan to flush out Taliban militants.
The blast from the explosives apparently carried in a school bag was so devastating that it blew up soldiers taking part in the parade, scattering their limbs, eyewitnesses said.
Police said an examination of the body parts at the scene indicated that the bomber was a boy aged around 15.
It was not immediately clear how the bomber got into the heavily guarded centre undetected. An attack on the same facility in 2006 had killed 35 soldiers.
Troops sealed off the area and even policemen had a difficult time getting through. The local army hospital declared an emergency as ambulances rushed in casualties.
The forces have taken the charge of rescue operation in its hand. Civilian rescue agencies and media were not allowed entry in the heavily protected military facility.
No particular militant group immediately claimed responsibility for the attack. But the Tehreek-e-Taliban Pakistan has carried out similar attacks earlier.
Mardan is 50 kilometers away from the Mohmand tribal district where the army recently launched a major attack.
Officials have said more than 25,000 people have fled the area in the past one week.
Prime Minister Yousuf Raza Gilani condemned the attack, saying "such cowardly attacks cannot affect the morale of the security agencies and the resolve of the nation to eradicate terrorism."
A Taliban spokesman later claimed responsibility for the attack and vowed to carry out more bigger strikes on all people who are providing security to the Americans.
Taliban spokesman Azam Tariq in telephone calls to media houses said, "we proudly claim this attack. These strikes are to avenge attacks by drone and military operations in the tribal areas."
"Until and unless these attacks stop we will continue," he said.
An army statement said, "in a suicide attack by a boy in school uniform at Punjab Regimental Centre at Mardan early this morning, 20 soldiers embraced martyrdom while 20 others were injured."
Today`s attack was the deadliest since a burqa-clad women with explosives strapped to her body blew herself up at a UN food distribution center on Christmas day in Bajour, killing 43 people.
