Peshawar, Pakistan - A car bomb ripped through a packed street on Saturday in the Pakistani city of Peshawar and killed 11 people, including women and children, officials said.

The device exploded near an ice cream shop and Internet cafe in the densely populated Kashkal area of the northwestern city, where people have sought shelter after escaping a Pakistani military offensive against Taliban militants in three districts further north.

"We were sitting in our showroom when there was a huge blast," Mohammad Anis, the owner of a nearby car showroom, said.

"When I came out, I saw fire and smoke everywhere around me. The first thing that I saw was this," he added, holding out a bloodied severed hand that had been ripped from an arm by the force of the explosion.

Gunshots were fired shortly after the bomb exploded and Anis said private security guards who had been sitting in his showroom, accompanying their bosses, ran outside and opened fire into the air in the wake of the blast.

Police said a school bus had been passing at the time of the explosion.

Body parts such as fingers, a foot and limbs were flung across the site shrouded in acrid black smoke, said an AFP reporter.

About 17 cars were damaged in the blast and five of them caught fire.

The car in which the apparently timed device was planted blew to pieces and only a portion of its engine remained intact, the reporter said.

People clutching wounds as blood seeped through to their white traditional shalwar khamis outfits walked around in a daze at the hospital as others lay wounded in bed, television footage showed.

"I was going to the bakery to buy bread for lunch when the explosion happened. I was blown four feet away. My right arm broke. I saw body parts all around and a big fire," said 25-year-old electrician Abdul Basir from hospital.

Hospital and security officials confirmed that 11 people died.

"We received nine dead bodies. Two more people expired later," Doctor Hameed Afridi at the main government hospital in Peshawar said.

"The condition of two people among the 31 injured is serious," he added.

The list of casualties signed by Afridi showed that two women, five men and four minors aged eight to 17 were among the dead.

Police official Abdul Gahfoor said the blast was caused by a car bomb, which damaged more than a dozen vehicles and a nearby Internet cafe.

Around 45 kilograms of explosives were used in the blast, said Peshawar bomb squad official Khushhal khan.

Three persons were injured in another explosion in the crowded Saddar market in Peshawar on Saturday evening, police officials said.

"It was a time bomb, which went off in a cosmetics and garment shop for ladies in Gora bazar of Saddar market area, wounding three people including a woman and a child," city police chief Sefwat Ghayour said.

Police official Abdul Ghafoor also confirmed the incident and said the "condition of all the three wounded persons is out of danger".

The new attacks came five days after a suicide car bomber killed 10 people at a paramilitary checkpoint on the outskirts of Darra Adam Khel, south of Peshawar.

The city, gateway to Pakistan's tribal badlands on the Afghan border where the United States says Taliban and al-Qaeda extremists have carved out safe havens to plot new attacks on the West, has become increasingly volatile.

Pakistan is pressing an offensive against the Taliban in three districts of North West Frontier Province, of which Peshawar is the capital, and the UN refugee agency said nearly a million displaced people registered with authorities in the last two weeks.

"By Friday evening, 987,140 people were registered as displaced since May 2," UNHCR spokesperson Ariane Rummery said. - AFP