0912 GMT July 15, 2018
The explosion in the eastern city of Jalalabad also left at least five people wounded and set a nearby petrol station alight, the provincial governor's spokesman Attaullah Khogyani told AFP.
Some of the victims were brought to hospital with severe burns, health director Najibullah Kamawal said, confirming the casualty toll.
"I saw a big ball of fire that threw people away. The people were burning," Esmatullah, who witnessed the incident, told AFP.
Tolo News posted a video online purportedly showing several burned-out vehicles and gutted shops at the scene of the attack.
The Daesh group claimed the attack via its Amaq propaganda agency – the latest carried out by the terrorists in restive Nangarhar Province, which borders Pakistan.
Daesh has claimed a series of high-casualty suicide bomb attacks in the province in recent weeks, as US and Afghan forces continue offensive operations against the terrorist group.
While the Taliban is Afghanistan's largest militant group, Daesh has a relatively small but potent presence mainly in the east and north of the country.
Violence to continue
Tuesday's attack came a day after US Secretary of State Mike Pompeo expressed "hope" for peace talks between the Afghan government and Taliban, during an unannounced visit to Kabul.
Pompeo's first trip to Afghanistan since he was sworn in as America's top diplomat in April came amid renewed optimism for peace in the war-weary country, following last month's unprecedented ceasefire by the Taliban and Kabul during Eid.
The Islamic holiday, Eid ul-Fitr was marked by spontaneous street celebrations involving Afghan security forces and Taliban militants, raising hopes peace was possible after 17 years of war.
The ceasefire did not extend to the Daesh franchise in Afghanistan, which first emerged in the country in 2014 and established a stronghold in Nangarhar before spreading north.
Violence is expected to continue ahead of Afghanistan's long-delayed legislative elections on October 20 that militants have vowed to disrupt.
Afghan security forces, already struggling to beat back the Taliban and Daesh on the battlefield, will be responsible for protecting polling stations, many of which will be located in schools.