The explosion, timed to coincide with the passing of a military convoy, destroyed as many as 15 houses. More people are feared trapped under the debris of the wrecked buildings.
“For the moment, what we can say is that three people died, according to rescue teams, but the number of victims could increase because many houses were destroyed,” said local government spokesman Edilberto Endo.
He did not say if soldiers were among the dead.
One military source, who spoke to AFP on condition of anonymity, blamed the blast on the Revolutionary Armed Forces of Colombia, the country's largest guerrilla group which has been fighting for the creation of a socialist state for the past four decades.
Florencia, located some 335 km from the capital Bogota, has been the scene of numerous bloody attacks. On 29 September, a remote-controlled bomb detonated by suspected leftist rebels killed at least 10 people and maimed 48 more.
The city is capital of the lawless Caqueta province and borders a former demilitarised area that the government handed over to FARC rebels to restart peace talks that eventually collapsed.
Colombian President Alvaro Uribe, elected in 2002 largely on his promise to rid the country of its leftist and rightist paramilitary groups, has failed to rein in violence in a war that claims the lives of thousands of people every year.