It happened late on Thursday night in the Mount Carmel Heights area of , where residents reported hearing a loud bang.
The road into the Mount Carmel Heights area has been closed and more than 1,000 residents are affected, a local politician has said.
Children have been unable to go to school amid the ongoing security alert.
Motorists have been advised to avoid the area.
There has been no evacuation from homes, police said, but major disruption has been caused, local assembly member Daniel McCrossan said.
“People this morning who will be attempting to go to work, to take their children to school, will not be able to leave this area,” he told BBC Radio Foyle.
Mr McCrossan, who represents the Social Democratic and Labour Party (SDLP), said he had heard the bang overnight and was also contacted by a number of constituents.
“It was very clear something wasn’t right,” he said.
He added that Mount Carmel Heights is one of Strabane’s largest residential areas.