The blast on the outskirts of Lashkar Gah, capital of Helmand province, came as U.S. Marines and their NATO and Afghan allies are poised to launch a major offensive against the Taliban in the area.
The explosives-packed motorcycle was parked near the dog fight, according to deputy provincial police chief Kamal Uddin.
Health Department director Dr. Inayat Ullah Ghafari confirmed the casualty toll, saying seven children were among the 26 wounded.
Dog fighting was forbidden under the Taliban regime but has emerged as a popular pastime in many parts of Afghanistan after the hard-line Islamist movement was ousted in 2001.
Such competitions have been targeted in the past. More than 100 people were killed in a suicide bombing at a dog fight in the southern city of Kandahar.
No date has been set for the Helmand offensive to begin, but U.S. commanders have said they plan to capture the town of Marjah, 380 miles (610 kilometers) southwest of Kabul, this winter.
In other violence, a U.S. service member was killed by a bomb Friday in western Afghanistan, NATO said. The brief statement gave no further details.
NATO also said a helicopter contracted by coalition forces was hit by small-arms fire Friday in the eastern province of Kapisa.
One person suffered minor wounds, but the helicopter suffered no significant damage and landed safely at a military base, the international force said in a statement.