Officials said one of two motorcycle men tossed the grenade in a crowd watching billiard games Friday afternoon. The duo escaped after the attack, said Maj. Gen. Agustin Dema-ala, commander of the Army's 6th Infantry Division.
"The two victims, a Muslim and a Christian, died in hospital from serious wounds," he told the Zamboanga Journal on Saturday.
He identified those killed as Buka Limpangan, 50, and Gary Sahidsahid, 23.
Police and military launched a joint manhunt operation to capture the suspects. Separatist Muslim rebels were also helping authorities track down the two still unidentified men.
"Our forces are tracking the attackers and we will arrest them and bring justice to the victims," Eid Kabalu, a spokesman for the Moro Islamic Liberation Front (MILF), said.
Police said it is still investigating the motive of the attack, but no group or individual claimed responsibility for the blast. The province was previously bombed by Abu Sayyaf militants whose group is tied to the al-Qaeda terror network.
Aside from the Abu Sayyaf, communist insurgents are also active in the area, and had attacked government and military targets in the past.
Last month, New People's Army insurgents detonated a landmine in North Cotabato's Tulunan town, killing three soldiers and wounding about a dozen more.