"Two people were killed and 13 were injured, but there are reports that the number of dead could be as high as seven. We are investigating it," Asghar Zareii, a public relations officer of Bushehr's governor-general, told AFP.
"One of the dead was decapitated," he added.
Zareii explained that the incident was caused by the firing of anti-aircraft cannon shells during a drill at a military airbase adjacent to where the Islamic republic's first nuclear power station is currently under construction.
He said the shells failed to explode in the air as they should have done, and on landing hit a minibus and a residential area. The two people known to have been killed, and most of the injured, were in the minibus.
A local police official was quoted by the official news agency IRNA as saying that the injured were in "a satifactory condition".
IRNA also put the toll at two dead and 13 injured.
The Bushehr plant is being built with Russian assistance, but does not currently contain any nuclear fuel. The plant, described by Iran as crucial for meeting future energy needs, is expected to go on stream in 2004 or 2005.
Hundreds of Russian engineers and their families are based at Bushehr.
Following international tensions surrounding its atomic energy programme -- which the US and Israel allege is merely a cover for nuclear weapons development -- Iran has stepped up its anti-aircraft defences near its main nuclear facilities.
On October 7, 1981, Israeli warplanes destroyed a nuclear reactor near Baghdad, after Israel accused Iraq of preparing to develop atomic weapons. There has been speculation that the Jewish state or even its chief ally, the United States, has been considering carrying out a similar pre-emptive strike against Iran.
But tensions have eased somewhat after Iran agreed to allow tougher inspections by the International Atomic Energy Agency (IAEA), provide the UN watchdog with a full declaration of its nuclear activities and suspend uranium enrichment.
Last month, the IAEA condemned Iran for 18 years of covert nuclear activities although a report said there was no clear evidence the country has been developing nuclear arms.
Although IAEA director general Mohamed ElBaradei said there was so far no evidence Iran was trying to make the bomb, Washington dismissed that conclusion Washington as "simply too impossible to believe."
And in November Israeli Foreign Minister Silvan Shalom described Iran's nuclear programme as a threat to Israel and to world peace, but when asked whether his country was willing to take military action against Iran, he replied: "We would like to do it in a peaceful way."
Israel also warned Iran would reach a "point of no return" in its suspected nuclear programme within a year unless there were concerted efforts to stop it.
Iran also has other nuclear facilities at Natanz, Arak and Isfahan to the south of Tehran, inside the capital itself as well as uranium mines in the centre of the country.
Press reports and witnesses have spoken of increased security around the facilities, including anti-aircraft gun installations.