Witnesses said that the explosion, close to a Pakistani air force base, damaged the police station, a mosque and nearby shops.
"The sound of the blast was very loud, and when I rushed out from my home I saw everything was destroyed here," Tariq Hasan, a witness, told AP Television News.
There was no immediate claim of responsibility, but numerous attacks in recent weeks, which have left more than 300 civilians and soldier dead, have been blamed on Taliban fighters.
The attacks appear to be aimed at weakening the government's resolve in its military operation against anti-government groups in South Waziristan on the border with Afghanistan.
"This is an obvious reaction to the operation in the tribal areas," Sahib Zada Anis, head of the northwestern city's administration, said.
At least 11 people were killed when a bomber blew himself up at a checkpoint in Peshawar on Saturday, the day after a lorry bombing at the regional headquarters of Pakistan's intelligence agency leaving at least 10 people dead.
"Terrorists have spread into our settled areas and have surrounded Peshawar, but they cannot defeat our resolve,'' Mian Iftikhar Hussain, the information minister for North West Frontier Province, said.
Last month, a car bomb exploded in a crowded grocery market in the centre of Peshawar, killing more than 100 people, mainly women and children.
The Taliban said it did not carry out that attack, described as the deadliest in the country in two years.
Separately, Malik Sher Zaman, a pro-government ethnic Pashtun tribal elder, was shot dead in the Bajaur region, north of Peshawar, a government official said.
Zaman had signed an agreement with the government to battle the Taliban, Abdul Malik, a local official, said.
Several hours later, more than one dozen fighters attacked the house of Mohammad Fahim Khan, an anti-Taliban mayor, outside Peshawar, but security guards repelled the attack, killing three of the assailants, Nabi Shah, a police official, said.
"Seeing three burqa-clad women early in the morning, Fahim Khan's security guards challenged them, and the men threw away their disguise and opened fire," Shah said. "But the guards were alert and they retaliated quickly."