Police were alerted to the blast at the restaurant in the popular square Lilla torg just before 2am.
The area was cordoned off while the national bomb squad scoured the scene for evidence.
The restaurant was damaged in the explosion. Photo: Johan Nilsson/TT
Several windows were shattered in the explosion, both at the restaurant and nearby buildings. There were no injuries and fire reported, but police described the material damage to the building as “extensive”.
Two people, previously known to the police, were held shortly after the incident. Police confirmed to public broadcaster SVT at 5.30am that they were in custody but had not yet been questioned.
Lilla torg, located in Malmö's Old Town, is home to a number of restaurants and bars. Photo: Johan Nilsson/TT
The same restaurant was targeted in a molotov cocktail attack on April 29th this year. That incident caused a fire, but it was quickly extinguished and there was no material damage and no injuries.