The condition of the three of the injured is stated to be critical.
The thunderous explosion occurred around 11.30 a.m. when the General Bus Stand, as it is known, was teeming with people.
In the past, Indian authorities have blamed rebels fighting against Indian rule in the disputed Kashmir region for similar grenade attacks. On Wednesday, the Indian Army warned Pakistan that any further provocations would have "dire consequences".
The explosion also injured passengers in a nearby parked bus which was set to leave for Amritsar in Punjab.
A grenade blast at Jammu bus stand today left one person dead and around 30 people injured.
This has always been a source of tension between the nuclear-armed neighbours as groups based in Pakistan have carried out deadly attacks on Indian soil.
Official sources said that one more person has succumbed to his injuries at GMC hospital taking the death toll to two.
The Pakistani government said that no such sites or targets were hit, and on 27 February launched its own air strike as a show of force.
An Indian fighter jet was shot sot down in Pakistan-administered Kashmir and the pilot was captured.
Tensions between the two sides escalated quickly.
Indian Finance Minister Arun Jaitley said: "The grenade attack in Jammu is condemnable".
Jammu has witnessed several incidents of militant attacks in the past despite little to no support to armed rebels that enjoy widespread public backing in the Kashmir region. Inspector General of Police, Jammu, MK Sinha, as quoted by PTI, informed that there was no specific input about such an attack.
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