The explosion occurred around 10.30 a.m. in Chogla area of Dera Ismail Khan in Khyber Pakhtunkhwa province, around 300 km from Islamabad, Xinhua reported.
The bomb was placed inside a closed bicycle repair shop and was detonated with a remote-controlled device, police said.
This was the second blast in two days in the city. On Saturday, eight people, four of them children, were killed in a blast near a Muharramprocession. Mian Iftikhar, information minister of Khyber Pakhtunkhwa, said a child was among those killed in Sunday's bombing. At least 12 shops and houses were destroyed in the blast.
The bomb went off when an estimated 100 people were at the site, police said. Bomb disposal squad officers said an estimated five to 10 kg of explosives were used in causing the blast.
No group claimed responsibility for the attack.
Federal interior minister Rehman Malik has ordered the arrest of the owner of the shop for interrogation.
Shias Sunday observed Ashura, the tenth day of Muharram which marks the death anniversary of Prophet Mohammad's grandson Hussain Ibn-e-Ali 1,300 years ago.
Muharram is considered a sensitive period in Pakistan, and many attacks on Shias by extremist Sunnis during Muharram have been reported in the past.
Since the first day of Muharram Nov 16, six attacks on Shia Muslims have been reported in the country, killing at least 43 people and injuring more than 200.
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