Autonomy-seeking fighters from the Kurdistan Workers Party, or PKK, exploded the car bomb late on Tuesday in the town of Semdinli, in Hakkari province, where the borders of Turkey, Iran and Iraq meet, the governor's office said in a statement on Wednesday.
The blast heavily damaged 67 houses and shops and shattered many windows in the town, the statement said.
The explosion also caused a temporary blackout in Semdinli, the Anatolia news agency said.
The PKK, considered a terrorist organisation by Ankara, the European Union and the US, is active in the region and has been blamed for similar blasts in the past.
Unrest in the southeast has notably increased this year after the PKK called off a five-year unilateral ceasefire in June 2004.
The separatists on 3 October ended a unilateral ceasefire that it started 20 August, and vowed to increase attacks. Turkey had ignored the ceasefire, and has promised to fight the group until all members either surrender or are killed.
The Kurdish conflict has claimed some 37,000 lives since 1984, when the separatist group took up arms for Kurdish self-rule in the region.