The blast in the Sayyida Zeinab neighbourhood occurred near the Sadr hospital, leaving a large crater and damaging vehicles.

State news agency SANA said the booby-trapped vehicle was parked in a garage near the shrine. It gave an initial toll of two people wounded.

The Sayyida Zeinab mausoleum houses the tomb of the prophet Mohammed's granddaughter and the site is extremely popular with Shiite pilgrims, especially from Iran, a staunch ally of the regime in Damascus.

Rami Abdel Rahman, who heads the Britain-based Syrian Observatory for Human Rights, confirmed the blast but said he had no immediate reports of casualties.

"We still are not sure of the target," Abdel Rahman told AFP.

The blast comes amid an escalation in violence in Syria where the regime of President Bashar al-Assad is seeking to put down a revolt that broke out in

March last year.

According to the Observatory, more than 14,100 people have been killed in the unrest.