The blast came hours after US Secretary of State Hillary Clinton arrived in Pakistan seeking a fresh start in ties to fight against Islamist militancy.
The Peshawar bomb went off in the busy Peepal Mandi market street in the old city, sparking a fire that engulfed several buildings.
The blast was caused by a car bomb, a senior city official said.
"The figure is rising. We have more than 80 dead including women and children," a doctor at the city's main hospital, Sahib Gul, told news agency.
Sources said, Pakistan is on high alert amid fears of retaliatory strikes by Taliban militants as the army attacks their strongholds in South Waziristan on the Afghan border.
Pak: Terror ravages Peshawar market, 45 killed
At least 45 people have been killed and several others injured in yet another bomb blast in Pakistan's Peshawar.
The blast took place in the busy market area of Peepal Mandi in Peshawar on Wednesday, Oct 28. Death toll is expected to rise as scores of people are still trapped by the devastation caused by the blast.
Dosens of shops in the wholesale gain market have been affected.
Rescue operations have begun. And visuals of the blast show rescue workers trying hard to douse the fire caused by the blast in the heart of Peshawar.
Details on the blast are awaited.
This is the third instance of terror attack in Peshawar in a month's time. While fifteen people were injured in a bombing outside a restaurant in the Hayatabad area of Peshawar on Friday, Oct 23; on Oct 9, above 40 people were killed and hundereds injured in another brutal terror attack.