A man detonated his vehicle, which was packed with explosives, as fans gathered at a field to watch two local teams face off at a volleyball tournament in the village of Shah Hasan Khan, in Bannu district, which borders the Taliban stronghold South Waziristan.
Britain immediately condemned the attack as "horrific" and vowed to work with Islamabad to tackle the threat posed by violent extremism.
The latest bombing marked a bloody start to 2010 for Pakistan, which has seen a surge in attacks blamed on the Taliban in recent months as Islamist fighters avenge military operations aimed at crushing their northwest strongholds.
"The villagers were watching the match between the two village teams when the bomber rashly drove his double-cabin pick-up vehicle into them and blew it up," district police chief Mohammad Ayub Khan told AFP.
Six children and five paramilitary soldiers were among the dead, he added.
Khan said that more than 20 houses on both sides of the open ground where the match was being played had collapsed, some with families inside.
The tournament was organised by the local peace committee, who had supported a government operation to expel militants from the area, Khan said.
It was the highest death toll from a suspected militant strike since a massive car bomb on October 28 killed 125 people in a crowded market in the northwestern provincial capital Peshawar.
Ramzan Bittani, a 33-year-old driver, told AFP by telephone from a local hospital that he had left the match to take a call.
"As I was listening, I saw a huge blue and white spark followed by an ear-piercing blast. When I was able to figure out what had happened, I saw bodies and smoke all around. My hand was fractured," he said.
Anwer Khan, 18, a student, said that he had just stepped out of his house and he saw a black pick-up speeding up towards the spectators.
"A giant flame leaped towards the sky. There was bright light everywhere, just like a flash, and then a very huge blast shook everything. Two pellets hit my forehead and blood started flowing," Khan said.
District police chief Khan blamed the bomb on Islamist extremists who were the target of a military operation in Bannu district last year.
Security has plummeted over the last two-and-a-half years in Pakistan, where militant violence has killed more than 2,800 people since July 2007.
The northwest has suffered the brunt of the militant campaign, with suicide bombings increasingly targeting civilians.
The military is now locked in its most ambitious assault yet on Taliban strongholds in South Waziristan, sending 30,000 troops into battle in the district on the Afghan border on October 17.
Washington, however, is urging Pakistan to do more to also stamp out al-Qaeda sanctuaries and dismantle havens of militants who cross the border and attack US and NATO troops stationed in Afghanistan.
On Friday in North Waziristan district, missiles fired from a US drone air craft killed three suspected militants 15 kilometres east of Miranshah, the main district town close to the Afghan border.
"A US drone fired two missiles, targeting a vehicle and killing three militants," a senior security official in the area told AFP.
The official requested anonymity because of the sensitivity of the US strikes in Pakistan, which have killed at least 662 people since August 2008 and greatly inflame anti-American sentiment in the Muslim nation.
A separate, earlier US drone attack killed four militants in Machikhel village, about 25 kilometres east of Miranshah.
Also on Friday, an anti-Taliban tribal leader and four others were killed in a roadside bomb in Bajaur tribal district, the latest in a wave of attacks against respected elders allied with the government against the extremists.