The explosion, likely detonated by remote control, hit vehicles being used by the militia in the Khyber region, said local security officer Khan Dad Khan. It also wounded 24 people, said local government official Iqbal Khan.
Shopkeeper Sharif Gul said the blast ignited a huge fire.
"People were burning," he said at a hospital in Peshawar, the main town in the northwest. "There was nothing to put out the fire."