The device, believed to have been triggered by a mobile phone, exploded in a small storehouse used by a village chief near a border police station in the Sungai Kolok district of Narathiwat province and caused damage across a 30m (98ft) radius, said police Lieutenant Sittidej Ruansong.
The three wounded included one police officer and two villagers. The blast on Sunday occurred near a market along the Malaysian frontier, he said.
The attack came after Queen Sirikit delivered a televised address late on Saturday calling on the public to unite against the ongoing violence in the southernmost provinces - the only Muslim-dominated areas of this largely Buddhist country.
"We have to condemn such actions as being totally devoid of humanity," she was quoted as saying by The Bangkok Post.
"We have to let these brutes know - without taking arms - what we feel."
The queen said she was shocked by a recent string of bombings at an international airport, a superstore and a hotel in the southern city of Hat Yai. Two people were killed and more than 70 others wounded in the 3 April blasts.
She expressed concern that the unrest could be economically devastating for Thailand as it could scare away tourists who provide important revenue.
Sunday's attack coincided with a trip to the region by members of the National Reconciliation Commission, a government-appointed panel led by former Prime Minister Anand Panyarachun that has been tasked with finding ways of lessening the violence.
A victim of the explosion at the
Hat Yai airport in Songkhla
The commission is scheduled to release reports later on Sunday on an incident in which 32 Muslims died at the hands of security forces in the Krue Se mosque, a centuries-old site, and on the deaths of at least 85 protesters who died at Tak Bai after being tied and stacked in lorries.
About 800 people have been slain in an upsurge of violence in Narathiwat, Yala and Pattani provinces since January last year.
Officials have generally blamed the unrest on a resurgent separatist movement thought to have faded away in the 1980s.
The Hat Yai bombings in neighbouring Songkhla province raised fears the insurgents were expanding their field of operations northward.
Southern Thai Muslims have long complained of unfair treatment by the central government, particularly in employment and education.
Narathiwat, the province where much of the violence - mostly drive-by shootings and bombings - has occurred, is about 1140km south of the capital, Bangkok.
Thailand faces international criticism for its heavy handed approach in dealing with activists and for its human rights record.