The Derry hotel badly damaged in a bomb attack hosted a recruitment event for the PSNI last week.
Police said a masked man threw a device into the reception area of the Everglades Hotel at 11.15pm last night.
The hotel was evacuated and a bomb disposal team was sent to the hotel.
However, police said that while they were working on the device it exploded.
No one was injured as a result of the explosion.
A burnt out car found a short time later at Foyle Road in Derry is believed to be linked to the hotel attack.
It is clear from the scene this morning that extensive damage has been caused to the reception area.
A PSNI spokesperson this morning praised the quick actions of the hotel staff in evacuating the building and raising the alarm.
No organisation has claimed responsibility for the hotel attack.
The Everglades Hotel hosted a recruitment event for the PSNI on May 22 and was due to host a similar event next week.
DUP councillor Gary Middleton, who was at the scene during the alert, said around 30 rooms were occupied in the Everglades Hotel last night.
Among the guests evacuated were people who had travelled to Derry for a funeral.
Alderman Middleton said the Everglades guests were taken to the City Hotel following the evacuation.
The bomb attack is an obvious massive blow to Derry's tourism industry.
Sinn Fein councillor, Paul Fleming, condemned the attack.
“This must have been a very frightening experience for staff, guests and local residents caught up in this incident," he said.
"It serves no purpose and those responsible need to come forward and explain to the people of Derry what the point of all this is.
"I would call upon anyone involved in this type of activity to desist; they have no strategy and are going against the will of the vast majority of the people of this city who have indicated that they want to move forward without these type of actions.
"The people of Derry do not want this happening in their name."
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