The convoy of Rural Development Minister Peerzada Mohammed Sayeed was attacked near Larnu village in central Anantnag district of the troubled region. Besides lobbing grenades, the attackers also opened fire.
Though the minister escaped with his life, he received minor injuries to his leg.
Ali Mahmood, the head of a local school and another by-stander were killed in the attack.
Among the injured were six Indian policemen, who were transferred to a hospital in the provincial capital of Srinagar.
Sayeed is a minister in the cabinet of Chief Minister Mufti Mohammed Sayeed, who took over power last year amid promises to end Kashmir’s unremitting cycle of violence.
Indian administered Kashmir has been caught up in violence since 1989, with more than a dozen Kashmiri-groups seeking the region’s independence from Indian rule.
The violence has left more than 38,000 people dead.
India accuses its Muslim-neighbor Pakistan of stoking the violence in Kashmir, a charge that Pakistan has steadfastly denied.
On Thursday, top Indian security officials once again said that Kashmiri fighters were continuing to infiltrate the region from Pakistan.
“Infiltration is continuing and we don’t think the training camps have been closed down,” Lieutenant General V.G.Patankar, the head of the Indian army in Kashmir said.