Tuesday's attack in Dera Ghazi Khan town in Punjab province is the latest in a series to hit Pakistan in recent months.
Islamist militants are blamed in the attacks.
Rescue official Natiq Hayat says the explosion left a large crater outside the house of Zulfikhar Khosa, the senior adviser to the chief minister of Punjab province.
No one in the house is believed to have been killed.
The initial investigation suggests Tuesday's blast was "a powerful car bomb," local police chief Athar Mubarak said.
The blast left a massive crater and was heard from a half-a-mile away, local commissioner Hasan Iqbal said. The home of Khosa was badly damaged, as were several shops in a nearby market.
Punjab province law minister Rana Sanaullah put the death toll at 10, and said at least 25 others were wounded. Many people were trapped under the rubble, and TV footage from the scene showed rescue workers scrambling around a smoke-filled pile of debris and metal.
Zulfiqar Khosa's son, Dost Mohammad Khosa, said two of his cousins were among the wounded.
"It was a direct attack on us," he said, declining to speculate who was behind it. His father was in Islamabad at the time of the blast, he said. Dost Mohammad Khosa was in the eastern city of Lahore.
Raza Khan, a local resident at the scene, said people were panicking.
"The whole market has collapsed," he told The Associated Press by phone. "There is smoke and people running here and there."
Islamist militants have staged several attacks in Punjab to illustrate their reach across the country, far beyond the northwest tribal regions bordering Afghanistan.
Several hard-line religious schools operate in Dera Ghazi Khan area. The town also has experienced sectarian attacks pitting Sunni and Shiite Muslims against each other.