At least 16 people, including a child, were killed in the blast, which took place on a busy market street in the middle of the day in Kostyantynivka. Kostyantynivka, in Ukraine's eastern Donetsk region, is near the front line.
President Zelensky has condemned a "deliberate" attack on Ukraine's "peaceful" city, SIA refers to foreign media.
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.
Mr 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 28 people are thought to be injured. A market, shops and a pharmacy are all reported to have been hit.
Police and rescue services are on the scene, still looking for survivors. It seems to be the worst attack of its kind for several months.
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