The blast occurred in a shopping area of the al-Hawari district as a UN convoy was passing through on Saturday.
There has been no immediate claim of responsibility for the blast so far.
Ahmed Mismari, the eastern-based Libyan National Army (LNA) spokesman, told reporters the two victims were with the United Nations Libya mission (UNSMIL). He added that ten people had been wounded, among them children.
Around the time of the blast, LNA commander Khalifa Haftar, announced a halt to military operations during the Muslim Eid al-Adha holiday, which lasts from Saturday until Tuesday, according to a statement from his forces in Benghazi.
The UN is trying to broker a truce in the capital Tripoli, where the LNA launched a surprise attack in April.
Heading a group of militias, Haftar launched an offensive on Tripoli on April 4 to wrest control of the capital, but his armed groups failed to breach the southern defenses of the city.
Since then, the fighting has left at least 1,100 people dead, more than 5,750 wounded, and over 100,000 people displaced, according to the World Health Organization (WHO).
Haftar’s offensive has upended UN-led plans to stabilize Libya after years of conflict that has left the oil-rich nation divided and caused living standards to plummet.
The renegade general has defied a truce call by the UN, ordering his militia not to relent in their offensive.
Libya plunged into chaos in 2011, when a popular uprising and a NATO intervention led to the ouster of long-time dictator Muammar Gaddafi and his execution by unruly fighters.
His ouster created a huge power vacuum, leading to chaos and the emergence of numerous militant outfits, including the Daesh terrorist group