Kathmandu  - At least three people, including two children, were killed Tuesday when a powerful bomb ripped through the centre of a busy highway town in southern Nepal, media reports said.

The bomb exploded at the Chandranighapur town centre in Rautahat district, about 140 kilometres south of the Nepalese capital Kathmandu, on Tuesday afternoon, prompting rioting in the town, independent Radio Kantipur said.

The blast killed a woman and her 2-year-old daughter along with her 3-year-old nephew, the radio station said.

At least two people were injured in the blast.

The radio station quoted witnesses as saying the bomb was planted on a push-cart selling fruits but it remained unclear who was responsible for the blast.

The town residents also imposed a strike in reaction to the blast, paralysing transport and stranding thousands of people.

The town lies on the main highway that links east and west Nepal.

There are dozens of armed groups operating in southern Nepal demanding a single state for the entire region with the right to self determination.

Their demands have been rejected by political parties in the central government.

The armed groups have carried out similar attacks in the past across the southern Nepalese plains known as Terai.

Rioting erupted soon after the explosions with irate residents attacking push-carts selling vegetables and fruits and hotels.

Reports said the situation was out of police control and reinforcements were being rushed into the town.

The latest violence came just two weeks after the Nepalese government officially invited armed rebel groups in Terai to come for peace talks.

However, one of the main groups involved in the insurgency, Janatantrik Terai Mukti Morcha, rejected the offer, describing it as an attempt to disrupt their campaign for a Terai state. (dpa)