Both the Taliban and al-Qaeda have rejected claims regarding their involvement in the attack.
The Tehreek-e-Taliban Pakistan (TTP), in a statement sent to the media, condemned the deadly blast and denied involvement in the explosion that rocked Peshawar's Meena Bazaar area on Wednesday.
Al-Qaeda, in its statement, said it does not kill innocent people.
The statement said that the terror strike was the handiwork of those people who wants to "defame jihad and refugees".
It warned that it would continue its struggle against the US and its allies across the world.
"The Taliban are losing the war, losing history"
Wajid Shamsul Hasan,
Pakistan's high commissioner to the UK
"The Taliban are losing the war, losing history. And while doing that they will kill as many as they would like to," Pakistan's high commissioner to the UK, Wajid Shamsul Hasan, told Al Jazeera.
"But I can tell you, as our foreign minister said, we'll not buckle down. We fight them and we'll destroy them."
Many of the victims were women and children, packed into the busy market to buy daily groceries.
The attack came as Hillary Clinton, the US secretary of state, touched down in Islamabad for talks with government officials.
Speaking in the Pakistani capital she expressed her support for the military's offensive against the Taliban and pledging continued US assistance.
"These extremists are committed to destroying that which is dear to us, as much as they are committed to destroying that which is dear to you, and to all people," Clinton said.
"So this is our struggle as well, and we commend the Pakistani military for their courageous fight, and we commit to stand shoulder to shoulder with the Pakistani people in your fight for peace and security."
The Peshawar blast was the deadliest attack in Pakistan in two years.
|Women in the Pakistani city of Hyderabad protest aginst the latest violence [EPA]
"There was a deafening sound and I was like a blind man for a few minutes," witness Mohammad Usman, who was wounded in the shoulder, told the Associated Press.
"I heard women and children crying and started to help others. There was the smell of human flesh in the air."
Omar Waraich, a journalist with The Independent newspaper, told Al Jazeera: "The blast will create a great deal of despair, certain panic.
"This is not the first time such a marketplace has been hit. What you're seeing is a gradual escalation.
"The question many people will be asking is, 'what is the government doing to protect these people and thwart these attacks before they're even mounted?"
Imran Khan, Al Jazeera's correspondent in Islamabad, said officials had told him that a car drove into a narrow and packed market place before exploding.
"The bomb disposal squad are at the location and are looking for clues as to what type of explosive was used," he said.
Ban Ki-moon, the UN secretary general, condemned the "appalling bomb attack".
"I want to express my outrage at the loss of so many innocent lives," he told a news conference in New York.
The blast comes as Pakistan's military is fighting members of the Tehreek-e-Taliban Pakistan (TTP) in the country's semi-autonomous tribal region of South Waziristan.
The military launched its offensive nearly two weeks ago, pitting about 30,000 Pakistani troops against an estimated 10 to 12,000 Taliban fighters in South Waziristan.
Tariq Azeem Khan, a Pakistani senator and a former minister of state for information, told Al Jazeera that the attack showed the Taliban were becoming "reckless" in their choice of targets.
"When they cannot get to the main targets because they are well guarded, they are doing these explosions all over the place - in the main shopping centres without any pre-determined targets.
"There's very little the government can do to try to protect every single shopping mall. It's a difficult task, but they are doing their best. Pakistan is paying a very high price at the moment.
Since the South Waziristan assault began, the military says it has killed at least 231 fighters, and lost 29 soldiers.
However, independent figures are impossible to come by as journalists and aid agencies are barred from the conflict zone.
More than 125,000 people have been registered as displaced by Pakistan's offensive in South Waziristan since October 13, United Nations officials have said.
The UN High Commissioner for Refugees has said that humanitarian access to people in need remains the key challenge for agencies, given the volatile security environment in the displacement areas.
The military has given no figures for civilian casualties, but those fleeing say many people caught in the crossfire have been killed.