© AFP.Boko Haram has carried out many attacks as part of its push for Islamic rule.
Blood-spattered people were seen fleeing the scene near a market. Vehicles collided trying to leave. No organisation has said it was behind the attack, but the Islamist militant group Boko Haram is active in the region.
Boko Haram, which translates as "Western education is sin", has been conducting a four-year campaign of violence to push for Islamic rule in northern Nigeria.
The military was unable to give the BBC a firm casualty figure for the explosion in Maiduguri, which is the capital of Borno state, but said a suspect had been arrested.
A second car is reported to have been set on fire by the blast. A witness said that the explosion occurred shortly after a motorised rickshaw drove into the market area.
One witness told the BBC: "I heard a very loud explosion followed by several other explosions. After a while, I came out of my shop and saw many lifeless bodies lying on the floor. I don't know the number of deaths. But... I saw many people on the floor motionless."
This is the latest in a string of attacks blamed on Boko Haram. On Sunday, militants are reported to have attacked a market in the village of Kayamula, also in Borno state. Five traders were killed.
Boko Haram was also suspected of being behind an attack on 20 December on a military barracks in the town of Bama, south-east of Maiduguri.
The group carried out co-ordinated attacks on Maiduguri's air base and military barracks - also in December - causing extensive damage.
In an attempt to combat the violence, the government declared a state of emergency in Borno last May, and in the neighbouring states of Adamawa and Yobe.
United Nations figures suggest more than 1,200 people have been killed in Islamist-related violence since the state of emergency was declared.
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