Simran Riyaz, aged nine, and her four-year-old brother Fayaz Ahmad were hit by splinters when they fiddled with an explosive device outside their house in village Lassipora in Khag area, some 40 kms from here.
The siblings were rushed to a nearby hospital where the girl succumbed to injuries, a police spokesman said.
A case had been registered and investigations were on, he said.
Police sources said preliminary investigations showed the explosive device might have been left unnoticed during practice firing by Army in Tosamaidan firing range in Budgam district.
Dozens of civilians in-and-around Tosamaidan had been killed and scores wounded in such explosions since the Army started using the meadow as a firing range in early 1960s.