The incident happened yesterday in an area of Karen state near the Thai border, which residents say has been rattled by fighting in recent weeks between troops and a rebel splinter group representing the ethnic Karen minority.
The latest round of talks aimed at securing a nationwide ceasefire in a nation beset by ethnic insurgencies ended in deadlock late last month -- leaving the government still short of its target of reaching peace before elections next year.
"Three men and a 12-year old boy were killed. Another two women and eight more men -- including an abbot from a nearby monastery -- were wounded," the policeman said.
A local hospital official, also asking not to be named, confirmed the death toll but put the number of wounded at eight.
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It was not clear who fired the weapon. Witnesses told AFP a mortar bomb struck a group of passengers who had left their vehicles which were blocked by a broken-down lorry.
Neither side was immediately available for comment but the army has a position near the road.
There have been clashes in Karen state for more than a fortnight after the DKBA apparently baulked at the movement of soldiers in the tense area -- even though the group signed a peace accord with the army more than a decade ago.
Efforts to negotiate a nationwide end to decades of civil conflicts in minority borderlands have been a government priority.
The Karen National Union has joined peace talks and a new round is scheduled for late October.