Dissident IRA members planted a 300-pound bomb in an abandoned van outside a police station in Aughnacloy, County Tyrone.
The local grade school and 350 homes were evacuated while bomb disposal experts made the bomb safe.
Irish Foreign Minister Michael Martin condemned the attack in the strongest possible terms as "a reckless and cowardly act, whose only impact was to put at grave risk the safety of the people of Aughnacloy".
He said the attack had no justification or excuse, no mandate and no legitimacy.
"The gangs, which carry out such violence and criminality, should cease their activity and disband immediately," Mr Martin added.
Local police commander Brian Kee accused the bombers of being "criminal terrorists".
He said the intention was to kill innocents as well as police.
"They completely ignored the fact that there could easily have been passers-by or nearby residents caught up and killed, or seriously injured, in an explosion."
"This is an outrage and should be condemned in the strongest possible terms by every right-thinking person," Supt. Kee said.
Irish member of parliament Seymour Crawford also condemned the Aughnacloy bomb saying: "The placing of a large bomb in Aughnacloy last night is sad proof that there are still significant numbers of people only interested in violence and destruction."
He added: "The border area of Aughnacloy and Truagh is a standing example of where people from all backgrounds, religious and political, have worked together to rebuild a community spirit."
"The action of this group of dissidents is only aimed at bringing us back to the bad old days that the majority of this country has clearly voted against in Good Friday Agreement."