Police say 11 people were hurt in the blast, three of them seriously, AP reported.
Local TV footage showed damaged shops with pieces of metal and wood littering the ground.
Peshawar is the capital of Khyber-Pakhtunkhwa Province and has been frequently targeted by the Pakistani Taliban.
In other news, Pakistani intelligence officials say suspected U.S. unmanned aircraft fired missiles at a vehicle in the tribal region near the border with Afghanistan, killing at least four militants.
The attack occurred early on October 27 in the South Waziristan tribal region.
The identities of the suspects killed in the attack were not immediately known.
The United States has killed a number of high-profile Al-Qaeda and Taliban leaders in Pakistan's restive tribal regions with drone attacks.
compiled from agency reports