He said the crowd had gathered to present their condolences at a meeting to mourn the recent deaths of two members of a local group fighting al-Qaeda in Iraq.
Sheik Omar al-Azawi, a member of the local Awakening Council, had just arrived at the scene when the explosion occurred.
"I first heard a thunderous explosion and when I turned my eyes to the tent I saw fire and smoke coming out," he said.
"Panicked people were jumping and running on all sides and then we started to evacuate those who were killed and wounded in our private cars until police and medical teams arrived."
Owen Fay, Al Jazeera's correspondent in Baghdad, said that the attack comes as the goverment focuses its efforts on different parts of the country, specifically fighting Shia armed groups in the south.
US and Iraqi authorities say al-Qaeda fighters have moved into the north Diyala province after being pushed out of other areas.
"Diyala is top of the list of provinces where al-Qaeda in Iraq has operated in the past, and where it seems that it may be returning right now," Fay said.
Al-Qaeda in Iraq is frequently blamed for attacking funerals, which are often held with little security.
Fay said: "Although [al-Qaeda in Iraq] have not yet claimed responsibility for any of these attacks, they bear all the hallmarks of the attacks that they have conducted in the past.
"And it more or less just shows that they maintain that ability to strike whenever and wherever they like."
The area around Kirkuk has often seen violence between the Arab and Kurdish communities, who both lay claim to the city and its large oil reserves.