"The blast happened at around noon in a market where people go to download music and videos to their mobile phones," Khost provincial police chief Faizullah Khairat told AFP.
There was no immediate claim of responsibility for the attack but the volatile province bordering Pakistan is contested by the Taliban.
Music was one of the many forms of entertainment banned during the Taliban's 1996-2001 rule and the militants have previously attacked such markets.
Khairat said the explosion was caused by a "remote controlled bomb".
Afghan security forces have been struggling to beat back a resurgent Taliban since US-led NATO forces ended their combat mission in 2014.