Police sources told Greater Kashmir that the grenade was thrown at the CRPF bunker near Palladium cinema, however it missed the target and exploded on the road.
Seven civilians, mostly pedestrians, and a CRPF Sub-Inspector were injured in the attack which took place at around 2 pm.
The injured civilians have been identified as Ghulam Nabi Nayak and his son Farooq Ahmad of Devsar Kulgam, Abdul Rahman Wani and Saleema Bani - both residents of Kawoosa Budgam, Mushtaq Ahmad Dar of Shivpora, Syed Abdul Majid of Natipora and Bashir Ahmad Wani of Bemina.
The condition of all the injured is reported to be stable.
Meanwhile, a heavy contingent of police and paramilitary forces was deployed in the area.
A search operation is underway and pedestrians and motorists are being frisked at various intersections.