Moscow, Russia (CNN) -- North Ossetia will observe a day of national mourning Friday to remember the victims of a car bombing that killed at least 17 people and wounded up to 123 others.
The local government decree ordered all flags on regional buildings to fly at half-staff. The region also planed to cancel all entertainment programs on local TV, as well as concerts and theater performances.
Among the victims of Thursday's blast was an 18-month-old baby, local health officials said.
The vehicle blew up near a market in the city of Vladikavkaz, the republic's leader, Taimuraz Mamsurov, told the Interfax news agency.
"Information that I possess indicates that the explosion in Vladikavkaz was organized by a suicide bomber, who drove a Volga 3102 car to near the entrance to the market," Mamsurov said.
Investigators said the explosive device contained the equivalent of 40 kilograms of TNT.
The bomb was placed inside a vehicle parked at the entrance to the central market in downtown Vladikavkaz, with a suicide bomber sitting inside the car, said the Investigative Committee of the Russian Prosecutor's Office, which called the attack a "terrorist act."
The committee also said the bomb was stuffed with various pieces of metal to increase the human casualties. A natural gas canister, stored in the car's trunk, also detonated, the committee said.
Russian President Dmitry Medvedev, speaking on national TV, pledged that all organizers of the deadly bombing will be identified and punished -- or killed.
"We will do all we can to catch these monsters and animals ... who have committed a terror attack, a barbaric terror attack, against ordinary people. We will do all we can to find and punish them in accordance with the laws of our country, and we will destroy them if they offer resistance or in other circumstances," Medvedev said.
The owner of the car used in the bomb attack has been identified and arrested, a local police official told the Interfax news agency.
The detainee said that he sold it to an unknown buyer on Wednesday, the police officer said.
The Russian government announced each family of those killed will receive 1 million rubles in compensation (more than $32,000).
North Ossetia and the rest of the Caucasus region have been plagued with violence and political instability.
The market has seen other terrorist attacks in the past.
In November 2008, a suicide bomber blew up a bus at a nearby station, killing 12 people and wounding more than 40. An explosion killed more than 50 people and wounded 300 in March 1999.
CNN's Maxim Tkachenko contributed to this report.