Abdul Ghafoor Afridi, a senior police official in Peshawar, said that 57 people had been wounded in the blast, but warned of more fatalities.
"One portion of the hotel was totally destroyed," he said. "Three people including a manager of the hotel are missing and we fear they are under the debris."
Medical and rescue efforts at the blast site have been hampered by power blackouts following the attack.
Armed men entered the Pearl Continental hotel late on Tuesday, firing at security personnel before detonating explosives, government and security officials said.
"It was a suicide attack," Sefwat Ghayur, Peshawar's police chief, said.
"Occupants of a double-cabin pick-up truck forced their way in, firing at the security guards. The attackers struck their vehicle into the hotel building, and it exploded on impact."
Though mostly Pakistani nationals were among the dead, Mian Iftikhar Hussain, the provincial information minister, said two foreigners were among the dead.
The UN named them as Aleksandar Vorkapic, a Serbian employee of the UNHCR refugee agency, and Perseveranda So, a Filipina worker with the UN children's agency (Unicef).
Patrick McCormack, a Unicef spokesman, told Al Jazeera that Perseveranda So had been working to improve girls' education in Pakistan.
"She happened to be in the wrong place at the wrong time," he said.
"We will obviously review our security situation, but you can't stop a big truck coming in with a bomb or suicide bombers .. if we allowed that kind of thing to stop us we would stop working in a lot of places."
Ban Ki-moon, the UN secretary-general, condemned "in the strongest possible terms" Tuesday's attack.
"Once again, a dedicated staff member of the United Nations is among the victims of a heinous terrorist attack which no cause can justify," he said.
Peshawar is the capital of the North West Frontier Province (NWFP) where Pakistani government forces have battled fighters loyal to the Taliban in recent weeks.
Mian Iftikhar Hussain, the information minister for the NWFP, said that the attack was likely a reaction to the military offensive.
"The possibility of this type of terrorist attack cannot be ruled out in future," he said. "We have declared a high alert in Peshawar and other cities."
Inayat Ali Khan, a local journalist, told Al Jazeera that the attack was similar in nature to previous attacks in Peshawar.
|One corner of the hotel collapsed
following the explosion [AFP]
"These tactics have been used several times in recent attacks – the terrorists fire shots against the security teams at the checkpoints, and then they enter their vehicle inside," he said.
Athar Abbas, Pakistan's Major General, told Al Jazeera: "It is not possible for the government to provide the full security and seal the city.
"In this kind of war there is a great advantage to the aggressor - they can strike at a point of choosing in accordance with their own time.
"100 per cent success cannot be guaranteed in this type of warfare ... they have sleeping cells in main cities and towns, but the government is fully aware of that.
"These kind of attacks are aimed at pressurising the government, it is a type of psychological warfare to bring the government under pressure."
The scene was also similar to that of last year's bombing at Islamabad's Marriott Hotel, which killed more than 50 people.
Both hotels were favoured places for foreigners and elite Pakistanis, making them high-profile targets despite tight security.
Iqbal Khattaq, the Peshawar bureau chief for Pakistan's Daily Times, told Al Jazeera that Pakistani intelligence agencies and police had been "tipped off" about a possible attack by fighters from the South Waziristan and the Swat region of the NWFP.
"This building is also quite far away from the main road, so it was [thought to be] hard for bombers to carry out an attack similar to a bombing at a Marriott hotel last year.
"American officials and diplomats were often seen at this hotel; we do not know whether any are among the dead and wounded."
The Pakistani military launched its offensive in the NWFP after Taliban fighters violated a deal that was to see stricter implementation of Islamic law for the region's three million people in exchange for peace.
More than a dozen bomb attacks have killed at least 100 people across Pakistan since the Pakistani military began its offensive in the NWFP in late April.