The blast occurred in Kalaya, the main town in the Orakzai tribal area, said local government administrator Khaistan Akbar. Orakzai is one of several areas in the semi-autonomous tribal region along the Afghan border where the military has been battling a domestic Taliban insurgency.
No group has claimed responsibility for the latest bombing, but Taliban militants regularly target security forces and civilians in the area.
The blast occurred near government and security offices, according to another local administrator, Javed Khan. It damaged one of the shops in the market. Some of the wounded were in critical condition, he said.
The military has launched multiple operations against the Pakistani Taliban in the northwest since 2009, but the militant have proved resilient and continue to carry out attacks.