The bomb exploded in the Och Bar restaurant near Mårtenstorget square in the early hours of Thursday morning, causing widespread damage.
The eatery's facade was damaged and several panes of glass were shattered in the blast. The restaurant was closed at the time and there have been no reports of any injuries.
According to newspaper Sydsvenskan, the bomb could be one in a series of revenge attacks. It has also been connected to a shooting in Malmö on Wednesday, when a 22-year-old man was shot several times in a moped drive-by.
The victim of that attack managed to escape uninjured although his car was damaged by gunfire.
Police commissioner Tony Pallon told Sydsvenskan that there was a definite correlation between the bomb explosion and the shooting incident.
The shooting incident is allegedly part of an ongoing feud between two rival criminal gangs, which culminated in the attempted murder of a 20-year-old man in June.
According to Sydsvenskan, both brothers had had a dispute with the 20-year-old.
However, the brothers deny having anything to do with his murder. Speaking to Sydsvenskan, one of the brothers said he had heard of the bomb in the restaurant, but had not been to see the scene.
The other brother lives upstairs from the restaurant and was at home when the bomb went off at 3am on Thursday morning. He was not injured and was one of the first to be questioned by police.
So far police have no information on how strong the explosives were, nor what type of explosive was used.