The bombing hit Jaramana, a mainly Druze and Christian town on the southeastern outskirts of Damascus that the Syrian Observatory for Human Rights described as generally supportive of the government of President Bashar al-Assad.
"At around 3 pm (1730 IST), a funeral procession was making its way to the cemetery, when a car parked on the side of the road exploded," an army official told AFP.
"Another 48 people were wounded, many critically," state television said. The Observatory said the funeral was for two Assad supporters killed in a bombing yesterday.
The force of explosion completely demolished the facade of one building and caused heavy damage to others nearby, an AFP photographer reported.
State media blamed rebel fighters for the bombing, which came amid an intensified bombardment by government troops of eastern districts of Damascus that shelter some of the Free Syrian Army's best organised battalions.
But the opposition Syrian National Council accused Assad's regime of staging the bombing against its own supporters in a bid to divert attention from the killings of hundreds of people during an army assault on a largely Sunni Muslim suburb of the capital last week.
"The regime wants to cover up for its massacres," SNC spokesman George Sabra said, alluding to the discovery of more than 300 bodies in the town of Daraya that sparked an international outcry.
"It also wants to punish residents of Jaramana -- who are of mixed religious backgrounds -- for welcoming people who were displaced from nearby towns," Sabra told AFP by telephone.
"It wants to turn the revolution... into a bloody civil war fought along sectarian lines," he said.