The Taliban in Pakistan has claimed responsibility for the bomb in New York's Times Square.
The terror group said it planted a crude device made of propane, petrol and fireworks to avenge the killing in April of al-Qaeda's two top leaders in Iraq and US interference in Muslim countries.
The claim could not be immediately verified and security analysts urged caution, saying there could be links to Islamist groups or to a domestic cause in the United States.
Tipped off by a street vendor, police found the bomb in a sport utility vehicle in Times Square when the entertainment and shopping area of Midtown Manhattan was packed with tourists and theater-goers on a warm Saturday evening.
Homeland Security Secretary Janet Napolitano said: "We're taking this very seriously. We're treating it as if it could be a potential terrorist attack."
Police are examining security camera footage for clues after the SUV was recorded traveling in the area, as forensics experts pored over the vehicle and the bomb parts.