Homes had been evacuated at Mimosa Court, Gobnascale, following the discovery of a suspect device overnight.
A controlled explosion was carried out by army bomb experts on Saturday morning and the object declared a hoax.
The YMCA centre in Drumahoe had been made available for residents. They have since been allowed to return home.
Pat Ramsey, SDLP MLA for Foyle, said the discovery had resulted in many vulnerable residents being forced from their homes.
"Whoever this device was aimed at, those responsible have attacked the whole community," he said.
"The SDLP condemns this attack and I call on those who have planted this devise to stop immediately."
Meanwhile, a second alert also in the Gobnascale/Top of the Hill area was sparked when a suspicious object was reported at around 11.10am. It was declared a hoax later that afternoon.
Bridget Meehan, Waterside councillor for Sinn Féin, said those behind the bomb alert are not wanted by the community.
"Whoever was behind this incident should explain to local residents what they have achieved by forcing families from their homes.
"The people of this area want to get on with their lives and trying to improve the future for their children without elements causing distress and inconvenience."