The explosive device, apparently planted underground, wounded six Syrian soldiers escorting the convoy as it entered the city of Daraa, cradle of a 14-month uprising against President Bashar al-Assad's regime.
Major General Robert Mood, the head of the 70-strong UN mission, was in the four-vehicle convoy but escaped unharmed along with 11 other observers and his spokesman, Neeraj Singh, said an AFP photographer travelling with them.
The Norwegian general said the attack was "a graphic example of violence that the Syrian people" were suffering on a daily basis.
"It is imperative that violence in all its forms must stop," Mood was quoted as saying by Singh, who added: "We remain focused on our task."
The opposition Syrian National Council accused the regime of being behind the blast, the latest breach of a month-old ceasefire agreement brokered by UN-Arab League envoy Annan.
"We believe the regime is using these tactics to try to push the observers out amid popular demands to increase their numbers," SNC executive committee member Samir Nashar told AFP.
"(Anti-regime) demonstrators want the observers, because they provide a safety guarantee. In their presence, people can express themselves through peaceful protests," said Nashar. "We are used to the regime's tactics of claims that there is terrorism and fundamentalism in Syria, which is not the case."
France strongly condemned the bombing. "We hold the Damascus regime responsible for the observers' security," said foreign ministry spokesman Bernard Valero.