At least 20 Syrian soldiers and militia were killed Saturday in a fresh attack by Islamist rebels, who planted explosives in a tunnel under an army position, a monitor said.
The historic Old City area has seen horrific violence ever since a major rebel offensive on Aleppo in July 2012.
It is a flashpoint area that sees daily fighting, and the army has set up multiple positions there.
"Islamist rebels detonated a tunnel near the Zahrawi market in the Old City of Aleppo, killing at least 20 army soldiers and pro-regime militiamen," said the Syrian Observatory for Human Rights.
Fighting broke out after the explosion, and at least one rebel was killed, said the Britain-based Observatory.
The attack was claimed by the Islamic Front, Syria's largest rebel alliance, which groups thousands of fighters across the strife-torn country.
The Front posted a link to a video on its Twitter account, showing a huge blast throwing a massive cloud of debris up into the air.
In recent weeks, the Islamic Front has frequently used tunnels to plant massive amounts of explosives beneath army positions.
The tactic has been used mainly in Aleppo and neighbouring Idlib provinces.
The latest blast came a day after the Observatory said some 2,000 people have been killed since January in regime bombing of rebel-held areas of Aleppo city and nearby towns and villages.
Syria's war has killed more than 162,000 people, and forced nearly half the population to flee their homes.