A day after a key Taliban leader killed himself to avoid capture elsewhere in Pakistan, rockets hit two houses, a mosque and a shop in Bannu, a troubled city in North West Frontier Province, said Khwaja Mohammed, a city police official.
Police said 10 civilians were killed and that seven police officers were among 40 others wounded.
Mohammed described the attack as "terrorist activity," but said it was too early to say more about who was behind it.
Taliban militants have been expanding their influence from strongholds in the tribal belt along the Afghan border, and Musharraf is under growing pressure from his key international backer, the United States, to crack down.
Since a bloody army siege of Islamabad's radical Red Mosque earlier this month, Pakistan has sent thousands of troops to the restive northwest, triggering a fierce militant response. More than 300 people who have died in violence across the country this month.
Militants have killed dozens of soldiers with suicide attacks in North Waziristan, the tribal region closest to Bannu.
Overnight, militants fired a rocket at a fort manned by paramilitary troops and blew up a government utility office in Miran Shan, the region's main town, forcing authorities to shutter all government offices and banks for fear of casualties, local security officials said.
Residents say almost half of the shops in Miran Shah have closed, and about 500 families have fled. In a sign of declining law and order, five masked men stole a pickup truck from a government office during daylight hours Wednesday.
"Nobody could say anything to them," said grocery store owner Mohammed Salim. "We closed our shops out of fear ... There is absolutely no security in the bazaar."
In the nearby town of Mir Ali, a bomb early Wednesday damaged a government-run school, local security officials said. No one was inside at the time.
After militants pulled out of a controversial peace deal with the government on July 15, a local tribal police force, intimidated by Taliban threats, abandoned its post, contributing to the lack of security. The regular army's presence is confined to checkpoints on roads between Miran Shah and other towns.
Despite U.S. criticism that the peace deal has allowed al Qaeda to regroup, Pakistan has been trying to resurrect the accord in recent days.
On Tuesday, tribal elders hoping to mediate said that neither side was willing to compromise. Militants have demanded the security forces withdraw from checkpoints. The governments first wants militants to promise to end suicide bombings and other attacks on troops and cross-border movement into Afghanistan.
Over the weekend, U.S. officials said Washington might consider military intervention to stem al Qaeda's growing ability to use its hide-out in Pakistan to launch terrorist attacks.
Pakistan scored a victory Tuesday, when Abdullah Mehsud, a Taliban veteran of Guantanamo Bay who was one of Pakistan's most-wanted rebel leaders, killed himself with a hand grenade when cornered by security forces in Zhob, south of his home in South Waziristan.
On Wednesday, unidentified gunmen shot to death another former Taliban commander, Hafiz Naimatullah Noorzai, near the border town of Chaman, police said.
It was unclear whether Noorzai had been an active member of the Taliban after the militia was ousted from power in Afghanistan in late 2001.