The grenade landed and exploded inside the vehicle, resulting in injuries to four policemen and the undertrial Shakeel Ahmad Khatana, police said.
A civilian, Ghulam Nabi, who was passing through the area, was also injured in the blast, they said.
Khatana, whose condition is stated to be critical, was being shifted to Baramulla district jail from Panthachowk police station.
The youth was arrested last year under Section 7/25 of the Arms Act and slapped with the Public Safety Act.
This is the first militant strike in Srinagar since the Muslim fasting month of Ramzan began last week.