A van was hijacked this morning around 11.30 am in the Creggan area by three masked men an object thrown inside.
Army Technical Officers have carried out an operation to determine if the device was viable.
Homes in the area have been evacuated while the area is made safe.
The Foyle MLA said: “This incident is yet another major disruption for residents in the Creggan area, on top of the disruption and distruction that was caused in the city centre over the weekend.
“The only people suffering here are local people.
“These attacks are as illogical as they are unacceptable.”