The blast occurred in the Shia-dominated Kocha Risaldar area of Peshawar, the capital of Khyber-Pakhtunkhwa province.
Most of the dead were Shias from Kurram tribal region, which has long been affected by sectarian violence.
Police officials said they suspected the blast was triggered by suicide bomber.
Kocha Risaldar has many Imambargahs and Imambaras.
Earlier in the day, a prominent Shia leader was shot dead in the city in an apparent sectarian attack.
There has been a sharp rise in sectarian violence in Pakistan since a deadly clash between Sunnis and Shias in Rawalpindi in November.