Turkish fighter jets killed 35 Kurds in an air strike the country's ruling party admitted could have been a "blunder" that mistakenly hit civilians instead of Kurdish separatists.

Turkey's military command said it had launched an air raid on Kurdistan Workers' Party (PKK) militants after a spy drone spotted a group moving toward its sensitive southeastern border under cover of darkness late Wednesday.

"According to initial reports, these people were smugglers and not terrorists," said Huseyin Celik, vice-president of the governing Justice and Development Party (AKP).

"If it turns out to have been a mistake, a blunder, rest assured that this will not be covered up," he told reporters in Ankara on Thursday, adding that it could have been an "operational accident" by the military.

"In the name of my party I would like to express our shock and sadness," he said, while calling on the public to await the results of an investigation.

If the victims are confirmed as civilians, it would be one of the deadliest such incidents in the long-running Kurdish separatist conflict in Turkey.

Ankara's joint military command said its jets had bombed an area inside Iraq regularly used by PKK rebels after army drones had detected movement along the border.

"The area where this happened is called Sinat-Haftanin, in northern Iraq, where there is no civilian population, and where the terrorist organisation has bases," a statement said, referring to the outlawed PKK.

But Turkey's main pro-Kurdish Peace and Democracy Party (BDP) said the planes had bombed villagers from Kurdish majority southeastern Turkey who were smuggling sugar and fuel across the border on mules and donkeys.

"It's clearly a massacre of civilians, of whom the oldest is 20," BDP leader Selahattin Demirtas said in a statement that called on Turkey's Kurdish population to respond "by democratic means."

In Istanbul, a protest called by the BDP drew 2,000 people in the city's Taksim Square.

Afterwards, several hundred youths shouting pro-PKK slogans threw stones at riot police, who responded with water cannon and tear gas, making several arrests.

Police also clashed with protesters in Diyarbakir and Sirnak, two mainly Kurdish towns in the southeast, firing tear gas and water cannon in response to demonstrators who threw stones and petrol bombs, local security officials said.

The governor's office in Sirnak province said 35 people had been killed and another person wounded in the raid.

"A crisis centre has been set up in the area and prosecutors and security officers have been sent" to the southeastern village of Ortasu near where the air strike took place, governor Vahdettin Ozkan said.

The pro-Kurdish Firat news agency released photos showing bodies wrapped in blankets, lying on the snow side by side, while television pictures showed angry and weeping villagers gathered around the bodies.

Locals used mules to carry the dead down from snowy mountain slopes in Uludere district, which lies about 20 kilometres (12 miles) from the Iraq border, local media reported.

Kitan Encu's eyes welled with tears as she recounted how she had to identify the bodies of Kurdish relatives killed in the strike.

"They openly massacred us. Why was this blood spilled? They must answer this question," said Encu, who lost 11 family members in the air raid.

"I saw the bodies to identify them. They were all burned, completely. They were in pieces," Encu said as she sat by the bedside of her 75-year-old mother in the State Hospital of Uludere.

"The oldest one was 20 years old, they were all students," the 33-year-old said.

Ertan Eris, a local BDP councillor, told pro-Kurdish Roj TV from the scene of the bombing that the dead were among a group of up to 40 people from Ortasu -- mainly aged between 16 and 20 -- engaged in cross-border smuggling.

PKK spokesman Ahmed Denis said in a statement to AFP in Baghdad that those killed were civilians and condemned the attack.

"Those people were transporting goods between the two countries and the government of Turkey knew that," he said.

"We do not have any base for our party in those areas."

Kurdish media and local sources close to the PKK have presented slain rebels as civilians after previous incidents in the area, where the militants have been known to operate.

The PKK took up arms in Kurdish-majority southeastern Turkey in 1984, sparking a conflict that has claimed about 45,000 lives. It is labelled a terrorist organisation by Ankara and much of the international community.

Clashes between Kurdish rebels and the army have escalated in recent months.

The Turkish military launched an operation on militant bases inside northern Iraq in October after a PKK attack killed 24 soldiers in the border town of Cukurca, the army's biggest loss since 1993.