The explosive used in the attack was either a hand grenade or a home-made bomb, officials said.
The device was thrown near the market district in the city of Diyarbakir, officials said.
|Kurdish separatist attacks have killed 15|
Turkish security officials this week [AFP]
Yilmaz Akinci, a journalist in Diyarbakir, told Al Jazeera that the blast occurred in a busy market as people were shopping before the Friday's Eid festival and the injured had been taken to the local university medical faculty hospital.
He quoted the Diyarbakir governor, who visited the site of the blast, as saying that no group had claimed responsibility yet.
But the governor and the police suspect PKK's hand, with the police already having launched an investigation into the attack.
Akinci agreed that the police officer's death would add further momentum to Ankara's threat of cross-border incursion into Iraq to root out the Kurdish separatists.
Earlier in the day, the Turkish government announced that it was preparing to authorise a military incursion into northern Iraq, where the Kurdish fighters are based.
Recep Erdogan, the Turkish prime minister, told the private CNN-Turk TV on Wednesday that a decree to allow cross-border military operations into Iraq could be sent to parliament on Thursday.
Ankara blames the Kurdistan Workers Party (PKK) for the deaths of 30,000 people since 1984, when the group took up arms for a Kurdish homeland in southeast Turkey.
Ties at stake
A cross-border incursion, however, would strain ties with the European Union, which Ankara hopes to join, and the US, which has urged Ankara not to take unilateral steps.
Huseyin Bagci, of Ankara's Middle East Technical University, said: "Turkey cannot intervene in northern Iraq today without the consent of the elected government in Baghdad because it would violate international law."
Iraq and Turkey recently signed an anti-terrorism agreement, but Baghdad refused Ankara's request to allow Turkish troops to pursue separatists across their shared border if the need arose.