A convoy of army vehicles was passing through Singhpora village when the explosion went off.

An unidentified caller claiming to be from the Jaish-e-Muhammad rebel group later telephoned the office of the Central News Service, a local news agency, and claimed responsibility for the attack.

Four army trucks and three civilian vehicles were damaged in the blast, Indian army spokesman Lieutenant Colonel V K Batra said.

Witnesses said the area has been cordoned off for search operations.

Singhpora is about 40km north of Srinagar, the summer capital of India's Jammu-Kashmir state. The highway links Srinagar with Uri, a major army garrison.

The attack comes days after India and Pakistan proposed talks for November and December on various issues, including a bus service through divided Kashmir.

Peace march

Peace talks continue between 
Pakistan and
India

The latest violence came minutes after thousands of school children held a peace march in Srinagar for the first time since the rebellion broke out in the region in 1989, witnesses said.

Nearly 3000 school children marched through the tightly guarded streets and banks of the region's famous Dal lake holding banners and placards reading - "Kashmir is paradise, we will protect it" and "Give peace a chance".

Violence involving soldiers and separatist guerrillas continues unabated in Kashmir, despite peace moves between India and Pakistan who have fought two of their three wars over the Himalayan region.

New Delhi and Islamabad have held a series of talks this year intended at building confidence after they went to the brink of another war in 2002.

But progress has been sluggish, particularly on Kashmir.

Leaders of the two countries revitalised the flagging peace process with a meeting in New York last month, vowing to continue talks aimed at restoring normalcy and cooperation.