The bomb was attached to a parked motorcycle and triggered by a mobile phone when a military truck pulled up to the tea shop in the municipal township of Pattani, according to police Colonel Prasert Chansawang of Pattani province.
The explosion occurred near an outdoor market that is popular with soldiers stationed in the area, Prasert said.
Six soldiers were among the injured. The fatalities were civilians seated at the cafe when the bomb exploded at about 9am local time (0200 GMT), Prasert said.
Suspected Muslim separatists in Thailand's far south have frequently used mobile phones to detonate explosives.
The government has ordered all mobile phones in affected provinces to be registered, and has sought co-operation from neighbouring Malaysia to bar roaming cross-border phone signals.
Violence occurs almost daily in Pattani, Narathiwat and Yala - the only Muslim-majority provinces in Thailand, which is mostly Buddhist.
The violence has left more than 1,300 dead since a Muslim insurgency flared in January 2004.