Parachinar, a tribal town close to the Afghan border in Pakistan's North West Frontier Province, has a history of sectarian violence between its Sunni and Shia communities.
Sahibzada Anees, a local official, said soldiers supported by helicopter gunships were patrolling the streets of the town, which has a population of around 70,000.
Fourteen people were reportedly killed when rockets crashed into a house early on Saturday. Two women and four children were among the dead.
He said the violence began after members of the Shia community staged a demonstration outside their mosque protesting against local Sunnis who had allegedly chanted anti-Shia slogans during a religious rally last week.
Last year, clashes between the two communities resulted in the deaths of around 20 people.
Shias, who make up just 20 per cent of Pakistan's population of 160 million, are in the majority in Parachinar.
Sectarian violence is believed to killed more than 4,000 people in Pakistan since the late 1980s.