The blast took place in Parbhani town, nearly 500km (310 miles) east of India's financial hub Mumbai, and came during prayers on the last Friday before the Muslim feast of Eid al-Fitr, which marks the end of the fasting month of Ramadan.
The attack sparked tension in the town of some 500,000 people as groups of Muslim youths threw stones and set on fire some shops and vehicles, police said.
Officials said they did not know who had thrown the bombs in Friday's attack.
"The situation is tense and mobs are setting fire to shops and vehicles and throwing stones in the main market area," Parbhani police officer SS Khandare said.
He said an indefinite curfew had been imposed to curb the violence. Police had earlier said seven people were injured in the bomb attack.
Chhagan Bhujbal, deputy chief minister of the state of Maharashtra, where Parbhani is located, said two of the injured were in critical condition.
"At the moment we have no idea of who is behind this. The situation is tense but under control"
deputy chief minister of Maharashtra
"Two crude bombs were thrown at a mosque in the Medina Nagar area. They were thrown by a pillion rider on a motorcycle," Bhujbal told a news conference in Mumbai.
"At the moment we have no idea of who is behind this. The situation is tense but under control," he said.
The bomb attack came nearly three months after Mumbai was rocked by twin car bombings which killed 52 people and wounded over 150.
Police had blamed those attacks on an outlawed Indian Muslim students' group, working alongside a Pakistan-based Kashmiri guerrilla group.