Nigerian Air Force jets struck Jilli market on the Borno-Yobe border on Saturday and killed at least 56 traders.
The jets targeted terrorists in the Jilli area during an anti-insurgency operation.
Instead the strikes hit the weekly market where people traded goods.
Reports of the death toll differ. Some local accounts put the number at 56 dead with 14 people injured and taken to the specialist hospital in Geidam, Yobe State.
A councillor for the area told Reuters more than 200 people lost their lives and that the toll could rise.
The Yobe State Emergency Management Agency confirmed the incident and said it received reports of casualties among marketers.
The agency activated its emergency response teams.
Meanwhile the Nigerian Air Force stated it carried out precision follow-up strikes on identified terrorist locations in the Jilli axis.
The military gave no details on civilian deaths.
Traders from nearby communities had gathered at the market when the jets appeared overhead.
Explosions followed and people ran for cover. Survivors helped move the injured to hospital.
This marks the latest case of civilian deaths during operations against terrorists in the northeast.
The region has seen years of conflict as security forces pursue Boko Haram fighters across the Borno-Yobe border area.
