The explosives-laden car was parked near the office of one of the so-called peace committees that have been formed by local elders trying to rid the area of extremists, regional government administrator Fakhruddin Khan said.
It was unclear how many people were in the office at the time, but Khan said those killed included tribal elders and passersby.
He said 40 people were wounded and the attack destroyed 35 shops and eight vehicles. The dead and wounded, including some in critical condition, were taken to hospitals in the northwestern city of Peshawar.
The region, in the Khyber Pakhtunkhwa province, is famous for its weapons market offering guns made by local craftsmen.
Provincial Information Minister Mian Iftikhar Hussain blamed the Pakistani Taliban, noting that the fundamentalist Islamic movement also had tried to kill a 14-year-old girl who is an advocate of education for girls and a critic of the Taliban. Malala Yousafzai was shot and wounded by a Taliban gunman in the Swat valley on Tuesday, an attack that has drawn widespread condemnation.
The girl remains on a ventilator but is in stable condition, an army spokesman, Maj. Gen. Asim Saleem Bajwa, told reporters Saturday.
She had been airlifted from Swat to a military hospital in the frontier city of Peshawar, where doctors removed a bullet from her neck. The bullet entered her head and traveled toward her spine. Bajwa said it was too soon to say whether the girl had a significant head injury.
After her sedatives were reduced Saturday, she moved her arms and legs.
The school Yousafzai was attending in Swat's main town of Mingora - which her father runs - reopened for classes Saturday. About 80 percent of the students showed up, but many were sad and scared, one of the teachers, Asghar Khan, said.
"We want them to concentrate on their studies without any fear or psychological impact from the attack," Khan said.
About 500 tribal elders held a rally in support of the girl in Mingora on Saturday. Some carried photos of her and of two other girls who were shot in the attack. They shouted, "Malala, we are all with you!"
Hussain, the provincial information minister, urged the federal government to consider launching a "decisive operation against terrorists" to eliminate the extremists.