"A group of terrorists exploited these children by asking them to plant a home-made bomb" in Daih, state news agency BNA quoted a police official as saying.
He said one child was "seriously" wounded when the device exploded.
Police photos showed one child's fingers mangled by the blast and both boys' faces and bodies peppered with shrapnel.
Police said they have launched an investigation aimed at identifying those who incited the pair to plant the device.
Monday's explosion in Daih that killed three policemen was the bloodiest attack on security forces since the Shiite majority backed an uprising in February 2011 against the ruling Al-Khalifa family.
Public Security Chief Major General Tariq al-Hassan said in a statement that four more suspects in the "terrorist blast" have been detained, raising to 29 the number of arrests linked to Monday's attack.
The kingdom remains deeply divided with persistent protests sparking clashes with police, scores of Shiites jailed on "terror" charges and reconciliation talks deadlocked.
The International Federation for Human Rights says at least 89 people have been killed in Bahrain since February 2011.
Last year the authorities increased the penalties for those convicted of violence, introducing the death penalty or life sentences for those convicted in cases which result in death or injury.
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