The hand grenade exploded on a residential street near one of Malmö's busiest bus stations in the Möllevången area of the southern city late on Sunday night.
No one was injured in the blast, which took place at 11pm at a street crossing between Ahlmansgatan and Claesgatan, although some 30 windows were shattered.
“I heard a powerful bang and looked outside to see what had happened. It's really lucky if no passersby were hurt, there's normally a lot of people walking here even late at night,” Annika Grönkvist, who lives near the area told regional tabloid Kvällsposten.
Police forensic teams and bomb squads confirmed they had found parts of a hand grenade at the scene of the explosion.
Regional police spokesman Stephan Söderholm said officers were investigating the incident, which he said could have had much more serious consequences.
“If you're there at the scene when it happens it's serious. It was a powerful blast. There was crushed glass on the street and the building is damaged,” he told Swedish newswire TT.
Traces of the hand grenade attack in Malmö. Photo: Johan Nilsson/TT
Malmö has been hit by more than 30 explosions since the start of the year. At one point in July four grenade attacks were reported in under a week. Last year, a total of 25 blasts took place in the city over the whole of 2014.
Many of the hand grenades are believed to come from former conflict zones in the Balkans. Police have previously linked some of the unrest to an increased import of illegal weapons and recently called for tougher border controls on the Öresund bridge between Sweden and Denmark in a bid to tackle the problem.
Earlier in the summer they also revealed that they were stepping up their presence in known trouble-hit areas such as Rosengård and Seved, where they announced around 30 people believed to be from criminal backgrounds were being tracked by officers.
Last month, concerns were raised that police staff shortages in the city were putting the public at risk, as around a third of the 705-strong Malmö force were on holiday.