The explosion took place at the scrap shop located at the GT By-Pass road near Samrala Chowk, Commissioner of Police (CP) Ishwar Singh said.
One person died on the spot while two succumbed to injuries on their way to hospital.
Three of the injured were admitted to Apollo Hospital, while one in local Civil Hospital, he said.
Ruling out any terrorist link in the explosion, he said investigations were on.
The Forensic Experts have been summoned from Chandigarh, the CP added.