Syrian state TV said at least 25 people died and 46 more were wounded in Friday's attack which it blamed on a suicide bomber.
The explosion, which targeted the central district of al-Maidan, a hub for anti-government protests, was described by the opposition as a government plot.
Syrian television showed residents and paramedics carrying human remains, holding them up for the camera.
Other footage showed a police bus with blood on its seats, and cars with blown-out windows and riddled with shrapnel.
Mohammed Shaar, the Syrian interior minister, also blamed a suicide bomber for "detonating himself with the aim of killing the largest number of people".
The blast came exactly two weeks after twin bombings killed 44 people in the city.
The official SANA news agency spoke of casualties among civilians and security force personnel.
Al Jazeera's Hashem Ahelbarra, reporting from the Turkish town of Antakya, near Syria's northern border, said it was unclear who was behind the attack.
"The government says that a suicide bomber detonated himself in a very crowded area in the al-Maidan district," he said.
"The opposition, on the other hand, is saying that this is a plot staged by the government to deter thousands of people that were planning to converge on that same spot to call for the international community to step in and enforce a no-fly zone and enforce also a dramatic of the regime in Syria."
Colonel Riad al-Asaad, the head of the Free Syrian Army, has dismissed the government's report of the attack, saying that Friday's explosion was "the work of the regime, just like the previous two explosions."
Some opposition activists said the explosion had targeted a police station, others said it was an intelligence building.
"There is more security in Maidan than usual because it is Friday and there are lots of military and security checkpoints. We do not know what was targeted yet," said a resident, a private sector employee who declined to be named.
Another resident said: "I didn't hear anything, but a lot of streets are closed and everyone is really nervous."
Hamas help sought
The head of the Arab League said on Friday he had asked the Damascus-based leader of the Palestinian group Hamas to ask the Syrian government to work to halt violence in the country.
Nabil Elaraby, the Arab League secretary-general, was speaking alongside Khaled Meshaal after a meeting in Cairo.
"I gave him a message today to the Syrian authorities that it is necessary to work with integrity, transparency and credibility to halt the violence that is happening in Syria," he said.
Last month's bombings targeted security buildings in the capital and were also the work of suicide bombers, the Syrian authorities have said.
The December 23 bombings led to claims and counterclaims over who was responsible, with the authorities saying they were likely the work of al-Qaeda and the opposition pointing the finger at the government.
Protests planned
Mass protests by pro-democracy activists had been planned for Friday to demand that an Arab League observers' mission, in Syria for two weeks, admit its failure to stop nearly 10 months of bloodshed and hand over to the UN.
The team of Arab League observers have been trying to assess whether Bashar al-Assad's government is complying with a peace accord aimed at ending its deadly crackdown on dissent.
Activists say the monitors do not have enough access and are escorted by Syrian authorities, who they say are manipulating them and hiding prisoners in military facilities.
After meeting Ban Ki-moon, the UN secretary-general, in New York on Wednesday, Sheikh Hamad bin Jassim Al Thani, Qatar's prime minister, pointed out that the Arab League's mission was the first of its kind.
"I said we must evaluate the types of mistakes it made and without a shadow of a doubt I see mistakes, even though we went in to observe, not to stop the violence," he said.
The "Syrian Revolution 2011" group, one of the driving forces on the internet behind the uprising, called on Facebook for the demonstrations on Friday to urge the "internationalisation of our cause".
An Arab League meeting in Egypt is scheduled for Sunday to discuss the mission which has come in for scathing criticism this week.
Syria has been racked for 10 months by an uprising against President al-Assad in which the UN says more than 5,000 people have been killed.
The government says armed "terrorists" have killed 2,000 members of the security forces.
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