The military launched ground and air operations against members of the Kurdistan Workers Party (PKK) following the blast.
The PKK, listed as a "terrorist" organisation by the United States and the European Union, began an armed campaign in 1984 to carve out an ethnic homeland in the predominantly Kurdish southeast Turkey.
The conflict has left about 40,000 people dead.
A poor showing by the ruling AK Party in the southeast in last month's municipal elections has put renewed pressure on the government to address the root cause of the conflict.
Kurds have long complained of discrimination against them by the state and have called for more political and cultural rights.
In a separate development, a woman was arrested after she detonated a bomb at Bilkent University in Ankara, during a visit by Hikmet Sami Turk, a former justice minister.
The woman, who was carrying 1kg of explosives on her body, was wounded in the attack but nobody else was hurt.
Turk, who regularly visits the university, was unpopular with left-wing groups for his policies when he was in office and had received death threats.
A second suspected suicide bomber was detained in the capital hours later.
Anita McNaught, Al Jazeera's correspondent in Istanbul, said the attack on the military convoy in Diyarbakir was an "absolutely standard PKK-Turkish military exchange".
"That fits the pattern we have seen many times before. [But] the suicide [bomber] attacks in Ankara are much more unusual," she said.