The trouble started when a seer was passing through the area and was stopped by members of another religious group, triggering an argument.
"During the exchange, a youth attacked three persons from other community to which the seer belongs with a sword," Sub-Divisional Magistrate (SDM) Bhaskar Lakshakar told PTI.
He said the condition of one of the injured was serious and he was shifted to Gwalior, whereas other were undergoing treatment at a government hospital in Chanderi.
According to police, the youth and other members of his community took objection to the seer passing through the area and blocked his way, forcing him to retreat.
Ashoknagar SP Tarun Nayak has reached Chanderi to monitor the situation which is under control now.
In protest against the attack, shops and other business establishments remained closed for the day.