The bombing, which appeared to target a military base, has been claimed by the Taliban.
"The attack took place in the morning at around 8.30 a.m. near a local base of the National Directorate of Security in Ghazni city," Arif Noori, a spokesman for the governor of Ghazni province, told Efe.
At least 12 people - eight security personnel, four civil - were killed in the powerful blast, Noori said.
Another 80 people, most of them schoolchildren, were injured, he added. They were mostly rushed to the provincial hospital, though there were some exceptions.
"The number of casualties may rise in the coming hours because a number of victims were evacuated to private hospitals and may be included in the list of casualties later," Noori said.
Taliban spokesman Zabihullah Mujahid claimed responsibility for the attack in a statement.
"A key base of the National Directorate of Security in Ghazni city was targeted by a martyrdom-seeking attacker using a VBIED (vehicle-borne improvised explosive device)," Mujahid said.
"According to our initial information, the base was completely destroyed and tens of NDS forces and workers were killed and injured."
This deadly attack came on the same day that a round of intra-Afghan peace talks commenced in Qatar between the insurgents and a delegation including members of the Kabul government taking part in an unofficial and personal capacity.
Meanwhile, the Taliban are at the same time holding talks with the US in Qatar. The insurgents have expressed their satisfaction with the advances made in the negotiations, focused on the withdrawal of US troops and the Taliban's promise that no terror group will attack another country while based on Afghan soil.
( With inputs from IANS )