The blast, which occurred after Friday prayers and also destroyed several houses in the provincial capital of Narathiwat, comes as the Thai junta seeks negotiating partners to restart peace talks with insurgents.
Thailand's southernmost provinces, bordering Malaysia, have been blistered by more than a decade of violence between insurgents seeking greater autonomy for the culturally distinct region and Thai security forces.
More than 6,300 people have been killed -- the majority civilians.
"A car bomb was detonated by remote control outside a karaoke bar," Anurut Kritsakaraket, police commander of three southern provinces of Pattani, Narathiwat and Yala told AFP.
Although the bar was closed, a dozen people eating nearby were wounded by the blast, with one in a serious condition, Anurut added.
The local governor later confirmed the toll to reporters.
This picture shows a car bomb on fire after it was detonated by suspected separatist militants in Thailand's restive southern province of Narathiwat on Feb 20. – AFP Photo/Madaree Tohlala
Bomb disposal experts also defused a bomb hidden on a motorcycle parked nearby and another smaller homemade device 500 metres from the blast site.
"The attackers wanted to lure police to the site before hitting us with another bomb," the police commander added.
Torn corrugated roofing, electrical wires, shattered glass and the charred shell of the car littered the street as police secured the area, according to an AFP witness.
The Thai junta has vowed to reboot peace talks to end the near-daily violence, which is characterised by roadside bombs and ambushes targeting Thai security forces and assassinations of Muslim or Buddhist locals perceived to have collaborated with the Thai state.
But a date for new talks has not been agreed, with rebels yet to publicly confirm the terms they are willing to accept to return to the negotiating table.
A previous round of talks with the toppled civilian administration collapsed as a political crisis engulfed Bangkok.
The Thai army now want assurances any rebel interlocutors will have the power to control the increasingly ruthless fighters on the ground.
Attacks have been less frequent over recent weeks, something some experts say reflects either the start of confidence building measures ahead of new talks, or the success of a military crackdown on insurgent suspects.
