Daesh claimed responsibility for the attack, with provincial official Sohrab Qaderi saying, "most of the victims were children, who were working in a car wash close to the suicide bombing site."
A suicide bomber in Afghanistan killed at least 12 people, including several children, on Tuesday, in an attack in the eastern city of Jalalabad claimed by Daesh.
The attacker detonated his explosives near a petrol pump, killing two officials working for Afghanistan's intelligence agency, and sparking a big fire.
Ten civilians, including children, were killed.
"Most of the victims were children who were working in a car wash," said Sohrab Qaderi, a member of the provincial council.
Officials said they were trying to identify charred bodies of children. Eight cars were burnt in the explosion.
Daesh claimed the attack in a statement on their Amaq news agency.
Inamullah Miakhel, a spokesman for the provincial health department, said five wounded people were taken to a hospital.
Last week, suicide bomber from Daesh targeted Afghanistan’s Sikh minority in Jalalabad, killing 13 members of the community.
Attacks by Daesh are being launched at a time when the US and Afghan special forces are trying to end the militants' control of a remote district in Nangarhar province where they have their main stronghold.
Jalalabad is the capital of the province.