The device was hidden in a ventilation window near the ceiling of the chapel, which is on the compound where the provincial police office is located in Jolo town on Jolo Island, Sulu provincial police said.
The island is a stronghold of al-Qaida-linked Abu Sayyaf militants, but it wasn't clear who was responsible for the bombing. Investigators recovered parts of a cell phone they believe detonated the device.
All of the wounded were civilians. One woman remained at a hospital for observation later Saturday, but police said one did not need hospital treatment and the others have been treated and sent home.
The Rev. Romeo Villanueva, 72, said a newly ordained priest, the Rev. Ricky Bacoldol, who was assisting him, was thrown off his feet by the blast impact and suffered a slight leg injury.
"I was reading the Gospel. I was not yet finished when there was a loud explosion," Villanueva told The Associated Press by telephone.
The roof over the front of the church collapsed and wooden beams and other debris flew in all directions. A portion of the ceiling shielded the organist from the blast, Villanueva said.
About 50 people were inside the church but many more were arriving at the time, he said.
President Benigno Aquino III's spokesman, Edwin Lacierda, said the bombing "violates the basic tenets of respect and peace of all who hold their faith dear." He said there could be no religious or political justification for the attack.
The Philippines is predominantly Catholic, but Christians are a minority on Jolo and nearby island provinces that are majority Muslim.
A bombing at the main Jolo cathedral last year killed two churchgoers, and the cathedral has been attacked in the past with grenades. The Abu Sayyaf, notorious for high-profile kidnappings and beheadings, has been blamed for those attacks.
The military estimates that battle setbacks, arrests and surrenders have reduced the group's strength to more than 300 from more than 1,000 guerrillas during its heyday in 2000.