The force of the explosion threw a police vehicle off a bridge, and into a river below, a police official said.
Masood Afridi, the disctrict's deputy police chief, said: "The vehicle was going to pick up prisoners and as it reached a bridge, an explosive-laden car exploded and nine of our policemen and two passers-by were killed."
He said the bomb was set off by remote control.
At least 12 people were taken to hospital for wounds, a doctor at Bannu hospital said.
It is the latest in a series of recent attacks against security personnel in the volatile area.
Violence in Pakistan has increased since Pervez Musharraf stepped down as president more than a week ago.
On Wednesday, Pakistani security forces claimed to have killed more than 40 anti-government fighters, including some foreigners, in the country's northwest tribal region.