The blast occurred while some persons were manufacturing bombs at Kollavallur at nearby Pannur, where tension is prevailing between CPI(M) and BJP workers.
"The two died on the spot," District Collector P Balakiran told reporters.
The two seriously injured have been admitted to Kozhikode Medical College Hospital, police said.
They said material used for making bombs were recovered from the spot.
"Police officials have been sent to the spot and searches are being conducted," Thalassery Rural Superintendent of Police Prateesh Kumar said.
"Home Minister has directed DGP to conduct a probe and submit a report," Home Minister's office sources said at Thiruvananthapuram.
The incident has triggered concern as it came in the background of efforts to constitute peace committees in the area following frequent BJP-CPI(M) clashes.
Meanwhile, BJP leaders alleged that CPI(M) was deliberately trying to torpedo the peace efforts.
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