Tel Abyad is one of two major border towns that were the initial focus of Turkey's cross-border assault in recent weeks to capture territory from Kurdish militia in northern Syria.
Turkey's government blamed the Syrian Kurdish YPG militia and the Turkey-based Kurdistan Workers Party (PKK) for the "inhuman attack." The Observatory said pro-Turkey fighters and civilians were among the dead and injured in the car explosion.
Turkey's state-owned Anadolu Agency said 13 were killed after a "bomb-laden vehicle" exploded in a marketplace in the center of Tel Abyad.
The town is where some of the heaviest fighting has taken place since the Turkish military launched its incursion last month in northeast Syria against the YPG, which for years was allied to the United States in the fight against Islamic State.
"We condemn this inhuman attack of the bloody PKK/YPG terrorists who attacked the innocent civilians of Tel Abyad who returned to their homes and lands as a result of the Operation Peace Spring," Turkey's defense ministry said on Twitter.
A spokesman for the Syrian Democratic Forces, which includes the YPG, was not immediately available for comment.
The Kurdistan Workers Party (PKK), based in Turkey, is designated a terrorist group by Turkey and its Western allies. Ankara considers the YPG a terrorist group because of its ties to PKK Kurdish militants in southeast Turkey.
On Friday, Turkish and Russian troops in armored vehicles held their first joint ground patrols in northeast Syria under a deal between the two countries that forced the YPG away from territory near Turkey's border.On Oct. 9, days after President Donald Trump's abrupt decision to pull out U.S. troops, Turkey and allied Syrian rebels launched a cross-border offensive and seized control of Tel Abyad and some 120 km (75 miles) of land along the frontier.