The bomb exploded near several buildings and shops of Hangu, near Pakistan's tribal areas, causing damage.
District police offices are also in the area, officers are among the victims, police said.
The Pakistani Taliban have said that they carried out the attack.
Militants attacks increased considerably since the assassination of the Chief of al-Qaeda Osama Bin Laden by us special forces in Pakistan on 2 May.
The official police Latif Khan, said the explosion left a deep crater.
"Were partially damaged buildings housing police station... but at least 15 stores, including a tea house and a restaurant are completely shaved," said.
Buildings also contain courts of Hangu district, police said.
Official Pakistani Mir shaman Khan said 56 people were injured. Most of the victims were civilians, and many had been in the restaurant, he added.
Witnesses said that the explosion was so powerful that they feared people were trapped in the rubble. The bomb contained approximately 900 lb (400 kg) of explosives, said the officials.
Hangu, in Khyber Pakhtunkhwa province, has a history of attacks by militants that often focus on the security forces.
The region also has a history of violence between Shiite and Sunni communities.
The attack was ADM Mike Mullen, Chairman of the US Joint Chiefs of Staff, arrived in Pakistan for talks with senior military and civilian leaders.
Prime Minister Syed Yusuf Raza Gilani condemned the explosion, describing the attackers as "enemies of humanity".
Taliban spokesman Pakistani Ehsanullah Ehsan told the AFP News Agency: "accept us responsibility for this attack." It was a small attack to avenge martyrdom Osama.
"Soon you will see more attacks." Revenge for Osama cannot be satisfied only with small attacks. ?
On Wednesday, four people were killed and 22 injured in a truck-suicide attack against a police station in Peshawar in the vicinity.
Monday, Pakistani troops ended a siege by militants who attacked a naval force of air base in Karachi, killing at least 16 people, including 10 soldiers.
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