The bomb planted in a water tanker ripped through a packed bazaar in Hazara town, an area dominated by Shiites on the outskirts of Quetta, the capital of oil and gas rich Baluchistan province, around 6 pm local time.
"At least 63 people have been killed and 180 injured. Most of them were from the Shiite community," Quetta city police chief Zubair Mehmood said.
The water tanker was placed near a pillar of a two-storey building, which collapsed due to the force of the blast. "We fear that several people have been trapped inside. Rescue work is going on," Mr Mehmood said.
Senior police official Wazir Khan Nasir said the bombing "was a sectarian attack and the Shiite community was the target".
A spokesman for the banned Sunni Muslim extremist group Lashkar-e-Jhangvi claimed responsibility for the bombing.
Provincial home secretary Akbar Hussain Durrani said the dead and injured included women and children, and confirmed reports of people trapped under rubble at the site of the collapsed building.
"We fear more casualties. We have announced an emergency in hospitals," he said.
Officials and witnesses said an angry mob initially surrounded the area following the bombing and were not allowing police, rescue workers and reporters to reach the site.
Baluchistan, which borders Iran and Afghanistan, has increasingly become a flashpoint for sectarian violence between Pakistan's majority Sunni Muslims and Shiites, who account for around a fifth of the country's 180 million people.
At least 92 people were killed and 121 wounded on January 10 when two suicide bombers blew themselves up at a crowded snooker club in an area of Quetta city dominated by the Shiite community. It was Pakistan's worst sectarian bombing, also claimed by Lashkar-e-Jhangvi.