The explosives-laden car was parked at Fauji Market in Jamrud area of Khyber Agency. It went off when the market was crowded, witnesses and security officials told TV news channels.
Footage on television showed a column of black smoke rising into the sky as ambulances rushed to the market to ferry the injured and bodies to nearby hospitals.
No group claimed responsibility for the attack.
Several militant groups, including the Pakistani Taliban and Lashkar-e-Islam, are active in Khyber Agency.