Lebanon’s state news agency reported that an Israeli drone strike was behind the explosion, but the Israeli military denied it was responsible.
The UN mission, Unifil, said those hurt were receiving treatment and that it was investigating the blast’s origin.
It comes after rising tensions along the unofficial Israel-Lebanon border.
In a statement, Unifil said a shell had exploded near the group who had been on a foot patrol along the UN-demarcated Blue Line that divides southern Lebanon from Israel.
It described the targeting of peacekeepers as “unacceptable”.
No details have been given about the nationality of the observers or their condition. The Lebanese translator is reported to be stable.
Lebanon’s state run National News Agency said Israeli “enemy drones” raided the area in southern Lebanon where the observers were wounded.
Israel’s military denied this, saying in a statement: “Contrary to the reports, the IDF [Israel Defense Forces] did not strike a Unifil vehicle in the area of Rmeish this morning.”
In recent days, tensions have again picked up along the unofficial border between Israel and Lebanon, with casualties on both sides.
Israel and the armed group Hezbollah trade almost daily strikes across the border, which began with the start of the Israel-Gaza war following the 7 October Hamas attack on Israel.
Hezbollah is a Lebanese Shia Muslim militant group with close ties to Iran and an ally of Hamas.
On Friday, Israel’s Defence Minister Yoav Gallant said the IDF would increase its attacks against the group in Lebanon, “shifting from repelling to actively pursuing Hezbollah”.
“Wherever they are hiding we will reach them,” he said.