"The blast, which happened in front of Iran Insurance Company, broke windows in some houses and shops and injured four people," Fars said, adding the explosion took place around midday.

Eyewitnesses told Fars the explosion happened in a motorcycle park and an unnamed police source said the explosions was caused by a percussion grenade placed on a motorbike.

Kordestan province has a substantial Kurdish population. The area has seen clashes between Iran's security forces and the outlawed Kurdish separatists of PJAK (Party of Free Life of Kurdistan), which is linked to the Kurdistan Workers' Party (PKK) fighting the Turkish army.

On November 25, Iranian intelligence agents arrested 11 PJAK members, who it said were behind several bomb attacks and had set alight and attacked a police station in Sanandaj.

Iran has repeatedly accused the United States of seeking to stir up ethnic unrest by giving material support to the PJAK and outlawed rebel groups in other sensitive border regions.