Jabha Shamiyeh, a new rebel coalition in Aleppo, was behind the blast, said the Syrian Observatory for Human Rights.
Observatory chief Rami Abdel Rahman said at least seven government troops and allied fighters were killed. An earlier statement from his group had put the toll at 20 dead or wounded.
Abdel Rahman told AFP several other government troops were wounded in the explosion but could not say how many.
The Britain-based Observatory, which relies on various sources for its reporting, said fierce clashes broke out in Aleppo's Old City after the tunnel blast.
Jabha Shamiyeh, formed less than a week ago, has not claimed responsibility, but opposition activists in Aleppo also said it was behind the explosion.
Meanwhile Syria's state television said "terrorist groups targeted the Old City with three blasts, west of the citadel... destroying several historic buildings in the area."
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The broadcaster, using the regime's term for rebels, did not report any casualties.
A Syrian military source in Aleppo, speaking on condition of anonymity, confirmed to AFP that rebels had detonated a tunnel dug underneath a building.
Meanwhile, clashes broke out, said the source, who added: "The army managed to repel a (rebel) bid to carry out an offensive."
Fighting in Aleppo erupted in mid-2012, and control of the city has since been divided between rebels on the eastside and the regime in the west.
Violence has devastated parts of the famed Old City.
In May, rebels detonated explosives under the famed Hotel Carlton, which government forces had been using as a base.
In September, several other buildings were destroyed in a similar tunnel attack.