"The missile struck when people were still inside their homes in the Maghayir district. It killed 18 civilians, including one child, and wounded dozens of others," said Rami Abdel Rahman, director of the Syrian Observatory for Human Rights.
"There are many people still stuck in the rubble, and ambulances are going back and forth transporting people," Abdel Rahman said.
The Britain-based Observatory said the death toll was likely to rise as more bodies were discovered.
Groups of men, some wearing the white helmets associated with civil defence volunteers, waded through the rubble.
More than 35 homes were destroyed, the Observatory said.
Once Syria's commercial hub, Aleppo is divided between rebel groups entrenched in the east and government troops in the western neighbourhoods.
It has suffered devastating damage as each side tries to dislodge the other.
Rights groups have criticised both sides for indiscriminate attacks on civilians, including with the regime's notorious barrel bombs.
Syria's conflict, which began in 2011 with anti-government protests, degenerated into a multi-front civil war that has killed more than 230,000 people.
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