The incident happened in Bonds Street in the Clooney area of the city in the early hours of Wednesday.
The object was found on Wednesday afternoon, sparking a security alert.
"We are still waiting on a full report from ATO in relation to the device," a PSNI spokeswoman said.
"A motive for the incident is being investigated."
Around 50 homes were evacuated and a number of businesses in the area forced to close for a time.
The Ulster Unionist Party's Foyle office is on the Bonds Street, and chair Ronnie McKeegan said the alert caused disruption.
"It's complete chaos; we've a very, very heavy police presence and a police cordon," he said on Wednesday afternoon.
"We've got business premises closed, shut down, people put out of their work, families on the street.
He added: "There is no excuse for planting devices or creating circumstances where people have to leave their homes and businesses. Local people simply want to get on with their lives in a normal society, to bring up their families and live in peace with their neighbours."
Alliance Policing Board member Trevor Lunn said there was no justification for the attack.
"The public do not want this sort of violence on our streets. They want to go about their lives without fear of bombs exploding," the Lagan Valley MLA said.
"Those responsible for this bomb attack obviously have no regard for the well being of other people.
"If anybody has any information about this attack then I would urge them to contact the police."
The security alert has now ended and all roads in the area have re-opened.
Anyone with any information about the incident or who saw any suspicious activity in the area in the early hours of Wednesday has been asked to contact Strand Road Police Station.