The blast ripped through a market area in front of a local Islamic courthouse, the Britain-based Syrian Observatory for Human Rights said.
Six rebel fighters were among the dead, but most of those killed were believed to be civilians, the group added.
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.
Video from the scene showed huge clouds of smoke rising from a street filled with debris and twisted metal, which bulldozers worked to clear.
Also Read
Civil defence workers, rebels and civilians picked through the rubble of a building, half of which had tumbled into the street.
The attack is not the first to hit the small town, though it is among the deadliest.
In November, rebels said 25 people -- civilians and opposition fighters -- were killed in a car bomb attack on a rebel headquarters.
The rebels accused the Islamic State group of being behind that attack.
The jihadist group is present elsewhere in Aleppo province and has sought to advance on Azaz in the past.
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 blast comes as a fragile ceasefire is being observed across much of Syria.
The truce negotiated by regime ally Russia and rebel backer Turkey does not include the Islamic State group or former Al-Qaeda affiliate Fateh al-Sham Front.
Disclaimer: No Business Standard Journalist was involved in creation of this content