Police were alerted to the incident at 11.30pm local time (4.30pm GMT) on Friday.
A statement from Umfang’s rescue team said the explosive was thrown and landed at the foot of an outdoor stage where festival goers were dancing.
Some of the injured were taken to the nearest hospital, he added.
Some reports indicate that the explosion was caused by an improvised explosive device (IED).
Images taken after the event and shared by a rescue team show debris strewn on the ground in the floodlit festival area.
Prime Minister Patongtarn Shinawatra shared his condolences to the families of those killed and injured in the blast in a message on X.
She said she ordered the police and security services to investigate the cause of the blast and help the victims. She also ordered an increase in the number of police officers to monitor all festival activities.
According to the Bangkok Post, between 8,000 and 9,000 people attended the week-long festival this year, and the attack happened on the penultimate night of the event.
Umphang is the southernmost district in Thailand’s northern Tak Province, which borders Myanmar to the west.
