President 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.
Kostyantynivka, in Ukraine's eastern Donetsk region, is near the front line.
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.
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Volodymyr 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 14:00 local time (12:00 BST) 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".
Mr 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.
Kostyantynivka sits close to the battlefield and has been hit on various occasions this year as a result:
It is also about 17 miles (27km) from the city of Bakhmut - in the Donetsk region as well - where fighting is known to have been intense for some time.
The city of Donetsk has been controlled by Russia's proxy authorities since 2014, who have repeatedly accused Ukrainian forces of targeting it since the war with Russia began last February.
The attack on Wednesday coincided with a visit by US Secretary of State Antony Blinken to Ukraine, where he met Mr Zelensky and other officials.
In the hours before he arrived, sirens wailed across the country and Kyiv's air defence system was busy intercepting missiles aimed at the capital.
Mr Blinken used the trip - his fourth to the Ukrainian capital in 18 months - to announce another US aid package for the war-torn country. It totals more than $1bn (£799.6m), he said.
- BBC.COM