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This is the second grenade attack in less than a month in the summer capital of what is now the union territory of Jammu and Kashmir.
The 35 injured, including three security personnel, were rushed to the nearby SMHS hospital where the condition of two is critical, officials said.
The person killed has been identified as 40-year-old Rinku Singh, a resident of Saharanpur, they said.
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On October 12, terrorists injured five people in a similar grenade attack in the area.
Traffic was scarce in the city with the capital of the newly created union territory of Jammu and Kashmir shifting to Jammu for the winter.