Fifteen of the wounded were critically hurt in the incident in Tarin Kot, capital of the central province of Uruzgan, said Haji Abdul Aziz, the deputy provincial governor. He said the attack took place in a bazaar about 1.5 km (one mile) from the Governor's House, which US ambassador Ronald E. Neumann was visiting.
"I can confirm that it was a suicide attack, but the person had used explosives attached to his body, not a car bomb as we thought earlier," he told Reuters.
Aziz said all of the victims were civilians, except for two policemen who were wounded. He said Neumann was with top local officials for the inauguration of a US-funded building, but none of them was hurt.
Qari Mohammad Yousuf, a spokesman for Taleban insurgents, said a local Taleban called Abdur Rahim carried out the attack. "Our intention was to kill the US ambassador," he told Reuters by satellite phone from an undisclosed location.
Suspected Taleban guerrillas have carried out a spate of suicide bombings in recent weeks, but in most of these only the attacker was killed.
The last major suicide attack in terms of casualties came in September, when a bomber and at least nine Afghan soldiers died in Kabul.
Taleban guerrillas have spoken of dozens more suicide attackers awaiting orders to strike. Earlier on Thursday, Afghan security forces blew up a car packed with explosives they believe was intended for an attack on US-led forces in the southern town of Spin Boldak on the Pakistani border, police said.
And on Monday, a suicide attacker drove a car bomb into a convoy of foreign troops in the southern city of Kandahar, wounding a US soldier and an Afghan woman and child.
The past year has seen a surge in insurgent violence in Afghanistan in which more than 1,200 people have been killed. Most of the dead have been militants, but they included more than 50 US soldiers.
The period has been the bloodiest for American forces in Afghanistan since they invaded the country in 2001 and overthrew the Taleban for refusing to hand over al Qaeda leader Osama bin Laden, mastermind of the September 11 attacks.
The recent spate of suicide attacks has come as the United States is planning to cut its troop numbers this spring and hand over more responsibility to Nato allies.