Malik passed away on the way to the hospital, according to Liaqat Ali Khan, the police chief of Peshawar, the capital of North West Frontier Province.
Once close to the Pakistani Taliban, Malik later switched sides and raised a lashkar, or local militia, to battle the fighters.
"Malik had survived several attacks on his life in the recent past, since he turned against the militants, but today the militants have finally killed him," Anis said.
He said nine of the wounded were in a critical condition.
Hospital officials said that two children were among the dead.
Al Jazeera's Imran Khan, reporting from Islamabad, said: "The damage could have been so much worse [but for] the fact that this wasn't a built-up residential area.
"This was an open field - a cattle market. So although the death toll was very high at 13 - and we think that's going to rise throughout the day - it could have been so much worse, as we have seen in Peshawar.
"An emergency has been declared at the local hospital where we have spoken to doctors there. They told us, "We are exhausted."
'Claims or denial'
Khan said nobody had claimed responsibility for the attack, pointing out that "normally, what we get is either claims or denial, pretty quickly after an attack".
Anti-government Taliban fighters have struck numerous times in Pakistan in recent weeks, killing more than 300 civilians and soldiers.
The attacks appear to be aimed at weakening the government's resolve to continue a military operation against Taliban and al-Qaeda fighters in South Waziristan, their main bastion, on the Afghan border.
More than 100 people were killed in last month alone from a car bombing in Peshawar that was marked as the deadliest attack in the country in two years.