Oleg Anashchenko, military chief of Luhansk People's Republic (LPR), was reported to have died instantly.
The incident was described by rebel spokesman Andrey Marochko as an "act of terrorism".
It follows the bloodiest week of clashes between Ukrainian troops and Russian-backed insurgents since 2015.
Mr Marochko said "Ukrainian secret services" were suspected of being behind the attack, which he said was aimed at "destabilising the Republic".
"We will track down the perpetrators of this monstrous act and they will receive the appropriate punishment," he said.
Officials in Kiev have denied any involvement in Saturday's bomb attack.
This week has seen an escalation in the violence in rebel-held eastern Ukraine, with a number of attacks that have reportedly left at least 35 people dead. There are fears that the actual death toll could be much higher.
Each side blames the other for the upsurge in violence.
Meanwhile US President Donald Trump is due to hold talks with his Ukrainian counterpart Petro Poroshenko.
A scheduled call is due to take place on Saturday in which Mr Poroshenko is likely to seek assurances that Washington will continue to provide diplomatic support to Ukraine.
Earlier this week, the government-held frontline town of Avdiivka in eastern Ukraine was hit by heavy shelling. The town, whose population is estimated to be about 22,000 people, was left without water and electricity in freezing conditions.
Russia and Ukraine, along with the rebels on Wednesday, signed up to calls for a ceasefire and the withdrawal of heavy weapons from Avdiivka by Sunday.
But Ukraine says it is preparing a possible evacuation of the town to avoid a humanitarian crisis.
The conflict in eastern Ukraine erupted after Russia annexed Ukraine's southern Crimea peninsula in March 2014.
A ceasefire was eventually agreed in February 2015 but there have been frequent violations. The latest truce began on 23 December.
The US and EU imposed sanctions on Russia in response to its actions in eastern Ukraine and Crimea.
Russia has repeatedly denied sending troops and weapons into eastern Ukraine, but admits that Russian "volunteers" fight alongside the rebels.
A senior commander with pro-Russian rebel forces in eastern Ukraine has been killed in a car bomb attack in Luhansk, rebels say.