Police have sealed off the area around the blast and Zahedan Governor Hassanali Nouri said police were pursuing those behind the nighttime blast.
Fars News Agency reported that several suspects have been arrested in connection with the percussion-bomb incident.
The explosion and street fighting came two days after a hard-line Sunni group called Jundallah said it was behind an attack on a bus transporting Islamic Revolution Guards Corps (IRGC) troops that killed 11 people and wounded dozens.
Iranian officials said five of those behind the February 14 bombing, including the key suspect, have been arrested by security forces. Other reports have suggested that dozens of people have been rounded up in connection with the deadly attack.
A Fars report suggested that the trials of those suspects could begin as early as today.
Iran has accused Britain and the United States of supporting ethnic minority rebels operating in sensitive border areas of Iran in an attempt to destabilize the country.
A local official suggested that documents to be presented at the trial of defendants in the February 14 bombing will point to Western involvement.
(Reuters, dpa, AFP)