A taxi driver was forced at gunpoint to drive a bomb to a Derry police station where it exploded on Tuesday morning. A dissident IRA group are said to be responsible.
The driver was accosted by two men in the early hours of the morning, one of them held a revolver to his head until they reached the police station and forced him to abandon his taxi.
The bomb exploded while police were trying to clear the area,severely damaging the police station and a nursing home nearby.
The area's MP, Mark Durkan, condemned those behind the attack.
The SDLP politician said: "This was a cowardly, dangerous and vulgar act.
"It is extremely fortunate that no injury has been caused or life lost as a result of this attack.
"Those responsible for this incident have achieved nothing and this campaign of violence will achieve nothing."
The attack comes weeks after Derry was boosted by the positive response to the Saville Inquiry report into the events of Bloody Sunday, and after it was named UK City of Culture.
Derry Mayor Colm Eastwood said the people of the city are outraged.
"There seems to be a lot of wreckage. The car is completely destroyed and it seems businesses across the street have been destroyed as well," he said.
"Police didn't even have time to evacuate a nursing home or apartments right beside the police station."
The mayor told the BBC: "We are very lucky today not to be talking about fatalities. It's an attack not just on the police but the entire community."
Sinn Fein's Martina Anderson also condemned the attack.
"Their actions are no part of a campaign to bring about Irish unity and they have little or no popular support," she said.
"Those of us in political leadership need to continue to keep working, to continue to build relationships and continue to demonstrate clearly that politics does work and that a political and peaceful path to a united Ireland is available.".
DUP MP Gregory Campbell also called for action.
"It is essential that not only words of condemnation follow these attacks but action flows from them as well," he said.
"Describing the perpetrators as 'evil' or 'traitors' is accurate as far as it goes but what is required to prevent re-occurrence is information, evidence, prosecution, conviction in a court followed by lengthy prison sentences.
"The community where these individuals operate from should provide the information and the police and courts must do their job."