Monday's bomb in Sabayoi district, which exploded shortly after 4 p.m., had been hidden in a motorcycle parked in front of the market next to a railway station, said police.
Provincial Gov. Sonthi Thechanon confirmed the initial casualty toll and said the site remained insecure because officials feared another bomb may have been planted there, a common tactic of terrorists seeking to assault security personnel.
Since early 2004, more than 2,200 people have been killed as a result of an Islamic insurgency that has swept over much of the southernmost provinces of Yala, Pattani and Narathiwat, the only ones with Muslim majorities in Buddhist-dominated Thailand.
The violence has occasionally spilled over to neighboring Songkhla, and Sabayoi district - which borders on Pattani and has a Muslim majority - has been a particular hot spot.
The insurgency takes advantage of long-standing sentiment among southern Muslims that they are treated like second-class citizens in Buddhist-dominated Thailand. Attacks on civilians and officials in the area are seen as a move to drive out Buddhists from the area.
Earlier Monday, a senior police official said domestic politics rather than Muslim insurgents may have been behind Sunday evening's bombs in Hat Yai that exploded near two hotels, two pharmacies, a department store and a restaurant.
Scores of Malaysians, Singaporeans and Indonesians spend their weekends in Hat Yai, but police said all the injured were Thai nationals. Two of the wounded were reported in serious condition.
Last September, six homemade bombs exploded in Hat Yai, killing four people, including the first Westerner to die in the separatist insurgency, though he was apparently not targeted.
In April 2005, there was another spate of bombings in Hat Yai, including one that killed two people at the city's international airport. At the same time, a department store and a hotel in the province were also bombed, and more than 70 people in all were wounded.
But the police chief of Songkhla province, Maj. Gen. Paithoon Phattanasophon, said politics may have been behind the most recent violence.
"So far we cannot rule out that the attack was linked to insurgents in the three southern provinces, but it is mostly likely linked to a political motive," he said.
"The way they planted the bombs shows the attackers did not mean to kill people but merely wanted to create confusion. The bombs were mostly planted far from where people were gathered in crowds," Paithoon said.
Political tensions have been brewing since the ouster of Prime Minister Thaksin Shinawatra in a bloodless coup last September, with cases of arson and bombings blamed on die-hard followers of the ousted leader.
Authorities have sought to prevent violence Wednesday, when the Constitutional Court rules on whether Thaksin's Thai Rak Thai political party, as well as the opposition Democrat party, should be banned for alleged electoral violations during balloting last year.
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