Kamal Hyder, Al Jazeera's correspondent in the Pakistani capital, Islamabad, said: "There is still confusion as to whether the device was planted in a passing bus or a vehicle located in that particular area, but one thing is quite clear: this was indeed a powerful device.
"The police are now saying that up to 100 kilos [of explosives] - perhaps more than that - may have been used in this particular attack."
Rescue workers were working frantically to save the injured, and the military has been called in to deal with the situation, our correspondent reported.
"What is surprising everyone is that immediately after the attack, the provincial information minister came out and said that he knew where the attack came from, and started saying that people should be united against the Taliban, even though the Taliban have not claimed responsibility," he said.
Zahir Shah Sheraz, a Pakistani journalist in Peshawar, told Al Jazeera that the officials he had spoken to had confirmed that it was a car bomb and that the possibility of a suicide attack could not be ruled out.
No responsibility claim
Television footage showed the charred skeleton of what appeared to be a
bus flipped on its side in the middle of the main road.
Twisted remains of a motorbike lay alongside the bus and a nearby vehicle was in flames.
There was no immediate claim of responsibility, but previous attacks have been blamed on the al-Qaeda-linked Pakistani Taliban.
Security forces have made gains this year against Pakistani Taliban fighters who have set off bombs in towns and cities.
The targets have been mostly security forces and foreigners.
Pakistan's military has indicated that it is readying for a major offensive in the tribal agency of South Waziristan against Taliban fighters. The operation could start as early as Monday.