The attack appeared to be the deadliest yet in the town in northern Aleppo province, which has been regularly hit by bombing targeting rebels and civilians.
The Britain-based Syrian Observatory for Human Rights said at least six rebels were among the dead, but most of those killed were civilians.
Observatory chief Rami Abdel Rahman said identification of the dead was being hampered by the fact that some bodies were completely burned in the blast.
Raging fires were burning in several vehicles, and the fire brigade was battling to put them out with a giant water tanker and hoses.
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Civil defence workers, rebels and civilians picked through the rubble of a building, half of which had tumbled into the street.
Azaz has been repeatedly struck by bomb attacks, including in November when rebels said 25 people -- civilians and opposition fighters -- were killed in a car bombing of a rebel headquarters.
The jihadist group is present elsewhere in Aleppo province and has sought to advance on Azaz in the past.
In October, at least 17 people were killed in a car bomb attack on a rebel checkpoint, the Observatory said.
There was no immediate claim of responsibility for today's attack, but Osama al-Merhi, a lawyer at the scene of the blast, pointed the finger at IS.
"These kinds of crimes are only committed by the terrorist group Daesh," he said, using an Arabic acronym for IS.
"They are the ones who target civilians and the cadres who are building this country," he told AFP.
The truce came into effect on December 30, and is intended to pave the way for new peace talks in Kazakh capital Astana, which regime ally Iran is also helping organise.
But the ceasefire and the planned talks have been threatened by ongoing violence in the rebel-held Wadi Barada region outside Damascus, which is the main water source for the capital.
Overnight, the Observatory said seven Syrian soldiers and two civilians were killed in clashes, though the fighting appeared to have calmed by late Saturday morning.