A low-intensity bomb was hurled outside the Sonargaon Pan-Pacific hotel in the Bangladesh capital Dhaka where Indian President Pranab Mukherjee is staying during his three-day visit.
There was only a minor explosion following the throwing of the crude device and no injuries or any damage has been reported.
The explosion took place at around 14:00 local time, said a spokesperson at the Tejgaon police station in Dhaka.
It was not immediately clear whether the 77-year-old president was at the hotel when the incident took place. Security for the visiting dignitary has been beefed up following the incident.
According to reports, two men on a motorcycle threw the home-made bomb at the hotel and sped away. No arrests have been made so far.
The Indian delegation has played down the incident. Presidential spokesperson Venu Rajamony said: "Bangladesh authorities have informed that about an hour back a crude cocktail was found and they are investigating the matter. None of the delegation members heard any explosion nor knew of any such incident. Indian security officials have expressed the view that this was a minor explosion ...bursting of such cocktails is common in Bangladesh during hartals and cannot be described as a bomb."
He said life in and around the hotel is "completely normal."
The incident took place on the second day of a strike called by the fundamentalist group Jamaat-e-Islami. The group's militant leader was sentenced to death over his involvement in the 1971 war crimes, sparking fierce clashes which have so far claimed over 70 lives.