The blast happened at the main market in the town of Strpce, which is mainly inhabited by the province's Serb minority.
The Strpce region, at the foot of Kosovo's mountainous southern border with Macedonia, has seen a rise in attacks on ethnic Serbs in recent months.
Police have opened an investigation into today's incident.
Kosovo has been administered by the United Nations since 1999. The province is about to enter talks that are due to decide its future status.