West Midlands police confirmed that it was similar in size to the devices planted outside BBC Television Centre in London and at Ealing Broadway earlier this year.
It was "probably" the work of the Real IRA, the republican group blamed for the previous terrorist attacks in London, police confirmed.
Birmingham's Assistant Chief Constable Chris Sims said: "Had it (the device) fully detonated in that busy city centre on a Saturday night we would have sustained very serious loss of life indeed and serious structural damage to the city.
"This incident fits a pattern of events involving Irish republican dissident groups, probably the Real IRA."
The bomb was planted in a beige Audi coupe, registration number E303 TOV, and police are appealing for help in tracing its owners.
They also want to hear from any potential witnesses who were in the vicinity of the blast, which happened at 2239GMT on Saturday.
The device exploded close to New Street railway station, but no-one was injured despite the area being packed with revellers.
Police immediately ruled out any link to the 11 September attacks - saying a warning was given, but too late to deactivate the device.
But the head of the Metropolitan Police's anti-terrorist branch, Assistant Commissioner Alan Fry, said he doubted the attack was a "spontaneous" reaction to current events in the province.
"I doubt that it was opportunist. The situation in Northern Ireland could have been anticipated some time ago - the difficult political situation and the change of name of the police force in Northern Ireland."
He said the bomb appeared to be a home-made device, but police and forensic investigations would aim to establish its exact nature - and any links to a particular terrorist cell - over the next few days.
He added: "I regret to say that I have been warning for some time that whilst the activity since June 2000 has all been in London, it could happen anywhere on the mainland."
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Bomb disposal experts have sealed off a 1,000m area around the site, on Smallbrook Queensway.
But use of anthrax was ruled out. The substance was believed to be stuffing from the car's seats.
Northern Ireland Secretary Dr John Reid said on Sunday night: "Those responsible for the
car bomb attack in Birmingham have absolutely nothing to offer but violence and destruction.
"We must redouble our efforts to protect those political institutions that can take us forward to stability through democratic politics."
Archbishop Vincent Nichols of Birmingham said: "I thank
God that no one suffered serious injury in the incident.
"This deliberate targeting of defenceless and innocent people shows just how
evil terrorism is. No one can justify such actions. No one should support or
defend them."
Security in the city is being stepped up, especially with many high-profile guests arriving for the CBI's annual conference, including Chancellor Gordon Brown.
Birmingham was the target of one of the Provisional IRA's worst atrocities when two pubs were blown up in 1974, leaving 21 people dead and scores injured. The pubs stood just 150 yards from the site of the latest blast.
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Decontamination experts were also called to the scene after passers-by reported seeing white powder come from the car, covering nearby police officers.
Related to this story:
Politicians create tense backdrop
(04 Nov 01 | Northern Ireland)
Real IRA: Met fears worse to come
(10 May 01 | UK)
The IRA campaigns in England
(04 Mar 01 | UK)
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