The alarm was raised in the Kitchener Street area overnight on Thursday.
A number of residents, many of whom were older members of the community, had to leave their homes as the area was sealed off for technical investigations.
Police said they found a "viable" explosive.
"The discarded device was viable and had the potential to cause serious harm," a statement from PSNI Chief Inspector Gabriel Moran on Friday revealed.
Residents who were evacuated have now been allowed to return home and road closures in the area have been lifted.
Mr Moran called on anyone with information to come forward.
"I want to take this opportunity to thank the community for their patience and also extend thanks to all those who provided facilities during this operation," he said.
"I would appeal to anyone with information to talk to police and tell us what they know."