The explosion occurred at about 9:00 am (0800 GMT), as primary school teachers and public sector workers were queueing for identity checks, according to witnesses.
“I am sad to confirm that an IED (improvised explosive device) most likely carried by a suicide bomber exploded in the Sabon Gari LG (local government district) and killed 25 people, including a two-year-old,” Kaduna State Governor Nasir El-Rufai said.
El-Rufai added in the statement posted on his Facebook page that 32 others were injured and were being treated in hospital.
Zaria, a mainly Muslim city some 75 kilometres (47 miles) north of the state capital Kaduna city, is near the border with Katsina and Kano states.
On Monday night, a young girl believed to be aged just 13 was killed when explosives strapped to her body detonated near a major mosque in Kano city.
That bombing followed a twin attack on a mosque and restaurant in the central city of Jos on Sunday, which left 44 people dead, and a suicide bomb attack on a church in Potiskum that killed five.
Boko Haram has increased the intensity and frequency of its attacks on civilians since President Muhammadu Buhari came to power on May 29 vowing to crush the rebels.
But he has been unable to stem the bloodshed from guerrilla-style attacks on “soft” targets.
With the latest blast, nearly 550 people have been killed since Buhari’s inauguration, according to AFP reporting.
Local government worker Mahmud Abbas said public sector staff and primary school teachers were undergoing screening to identify potential ghost workers on the state’s payroll.
Another staff member who was waiting outside, Mohammed Abubakar, said: “We were taking turns going into the hall in batches for the screening and also to get our pay cheques.
“The first batch had gone in. There were almost 100 people there, including the staff, the screening committee and accountants from the banks.
“There was a huge explosion inside the hall followed by billows of smoke and dust. Now the area has been cordoned off by security men.
“I can’t give you an exact toll but I believe that dozens must have died given the number of people inside and the sound of the explosion.”
El-Rufai, an All Progressives Congress (APC) party leader, said people in Zaria should be vigilant and avoid crowded places such as mosques, churches and bus stations in the next few weeks.
“We call on our people to report any suspicious persons and movements to law enforcement agents, traditional rulers and religious leaders,” he added in a post on Twitter.
His warning followed a country-wide order from the federal police chief, Solomon Arase, to state commanders to increase security at all places of workship.
“Adequate security has also been ordered for venues where Muslims break (the Ramadan) fast in the evenings,” he said in a statement late on Monday.
Arase also said street hawking and trading on roads in the capital Abuja have been banned, while unauthorised taxis and buses were not allowed to park in the centre of the city.
Zaria has not been known as a stronghold of Boko Haram, which has been fighting for six years to create a hardline Islamic state in Northeast Nigeria, but it has been attacked before.
In March last year, a prominent Salafist cleric who had criticised the group was shot dead with his wife and son as he drove home from teaching a theology class.
An Islamic boarding school that he ran was previously hit by a bomb blast and gunfire in September 2012.
Zaria was also where a French engineer managed to flee from his captors in November 2013 after being held for nine months by the Boko Haram offshoot Ansaru.
In June 2012, bomb blasts ripped through two churches in Zaria, killing several worshippers and injuring many others. Boko Haram claimed the attacks.