President Volodymyr Zelensky has condemned a "deliberate" attack on Ukraine's "peaceful city" of Kostyantynivka.
At least 17 people, including a child, were killed in the blast, which took place on a busy market street in the middle of the day - a rarity.
Kostyantynivka, in Ukraine's eastern Donetsk region, is near the frontline.
Videos on social media show a bright orange explosion at the far end of a street where people were out shopping. Russia is yet to comment on the attack.
Zelensky, who has blamed Moscow, said those killed were "people who did nothing wrong" - and warned the death toll could increase.
Dealing with Russia, he said, meant turning a blind eye to the audacity of evil.
At least 33 people are thought to be injured. A market, pharmacy and shops are all reported to have been hit, resulting in a now-contained fire.
Footage and images circulating online appeared to show the moment of the explosion and its graphic aftermath.
It was one of the worst attacks on Ukrainian civilians since the spring, and took place in a busy street at around 2pm local time as people flocked to market stalls and café terraces.
Ukraine's Interior Minister Ihor Klymenko said a few hours later that the search and rescue operation had been completed.
Diana Khodak, a local shopkeeper, recalled the moment a "flash" of light appeared and she told colleagues and customers to "lie on the floor".
Speaking to Reuters news agency, she described seeing soldiers carrying a woman afterwards who "had an open fracture and her bone was sticking out from her leg".
Zelensky described the attack as "utter inhumanity", while his wife Olena Zelenska said it showed "horrific cruelty".
An investigation has been launched by Ukraine's prosecutor-general, whose office said it was in pursuit of "criminal proceedings for violation of the laws and customs of war".
"Prosecutors are taking all possible and appropriate measures to record war crimes committed by the Russian Federation," a statement added.
Officials in Russia have not yet commented on the attack. They have previously denied targeting citizens as part of their offensive.