Most of the victims belonged to the local Salarzai tribe which supported military action against the militants and formed a militia to force them from Bajaur.
"At least 43 people were killed and more than 100 wounded in the suicide bombing," top tribal administration official Zakir Hussain said.
Separately, 40 militants were killed in Mohmand, another lawless tribal district, in a series of military raids, officials said.
There were conflicting reports about the identity of the bomber in Khar with some officials saying the attacker was a woman, while others claimed a man disguised in a burqa was responsible.
The bomber was intercepted at a checkpoint outside the ration distribution centre and the blast occurred during a search, Sohail Khan said.
The deputy administrator of Khar, Tariq Khan, told AFP that the bombing was carried out by a woman. "It was a female suicide bomber," he said.
Tribal police officials Mubashir Khan and Munasib Khan also said the attacker was a woman, who resisted being searched and hurled a hand grenade at security guards at the checkpoint before triggering her bomb.
"I was waiting to be searched in a queue at the checkpoint outside the ration point and heard a grenade explosion. People started running in panic and then a huge blast occurred," tribesman Mushtaq Khan told AFP in hospital.
Khan, who suffered injuries to his arm, said he saw many people lying on the ground in pools of blood amid a cloud of dust and smoke.
Salarzai tribespeople had set up a vigilante force to evict militants from their area, but officials declined to comment when asked if they were the bomber's intended target.
A spokesman for Tehreek-e-Taliban Pakistan (TTP) claimed responsibility for the bombing.
"We carried out the suicide attack in Khar because these people had made a lashkar (tribal vigilante force) against us," Azam Tariq told AFP in a telephone call.
Bajaur is one of seven Pakistani tribal districts, which the United States considers the global headquarters of Al-Qaeda and among the most dangerous places on Earth.
Security officials said they had been warned that two suicide bombers had entered Bajaur and would carry out attacks on December 22, but had changed their plans.
The local administration imposed an indefinite curfew in Khar while security forces patrolled streets and launched a search, officials said.
Doctor Mohammad Hafeez, head of the local state-run hospital, confirmed the death toll and said there were several women and children among the casualties.
In a first foreign reaction, British junior foreign minister Alistair Burt said, "This appalling attack on innocent refugees is a cruel reminder of the indiscriminate aims of the terrorists and an example of why the world must work together to do all we can to confront a menace without boundaries."
In Mohmand, another tribal area, at least 40 militants were killed when helicopter gunships pounded their hideouts, officials said.
"Since yesterday Pakistani security forces helped by helicopter gunships carried out raids on suspected militant hideouts and killed 40 militants," Mohmand's top administration official Amjad Ali Khan told AFP.
Security forces had launched an operation in Baizai and Lakro villages following co-ordinated attacks on five checkposts on Friday in which 11 paramilitary soldiers and 24 militants were killed.
Pakistan's military first conducted operations in Bajaur in August 2008 and have repeatedly claimed to have eliminated the Islamist militant threat.
Around 4,000 people have died in suicide and bomb attacks across Pakistan since government forces raided an extremist mosque in Islamabad in 2007. The attacks have been blamed on networks linked to the Taliban and Al-Qaeda.