The explosion tore up the front stands of the concert venue in Colombo as Indian Bollywood star Shahrukh Khan wrapped up his three-hour show, the BBC reported Sunday.
A woman and child were killed and the injured, all audience members, suffered shrapnel wounds.
Buddhist monks objected to the event being staged on the first anniversary of the death of a popular monk, Gangodawila Soma. Khan began his concert by observing a minute's silence in memory of the monk.
Followers of the monks and fans had clashed near the venue with police who used teargas, water cannons and rubber bullets to disperse them.