According to Express 24/7 correspondent Iftikhar Firdous, the suicide bomber was in a closed room on the first floor of Khalid market when he blew himself up killing one other person.
Security officials say that the target was possibly a mosque situated close to the market.
Most of the shops had been shut for Friday prayers.
Rescue teams from Peshawar have been deployed while security forces have reached the site.
In November 2010, a suicide attack on a mosque in the area had killed more than 90 people.
The region is known for providing help to the government in combating militants.
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