A bomb exploded outside the Jakarta residence of the Philippines ambassador to Indonesia yesterday killing two people and wounding at least 18, including Manila's envoy.
The Indonesian President, Mr Abdurrahman Wahid, said he suspected the attack was linked to separatist rebels in the southern Philippines.
"I feel there is a connection with the situation in the southern Philippines," Mr Wahid told reporters. "We are sad, and we regret this and offer our sympathies."
Indonesian police refused to speculate on who was behind the explosion, which partially destroyed the ambassador's residence in central Jakarta and damaged nearby homes and government buildings, adding to political tensions in the embattled country.
The Philippine government, which put all its embassies on alert after the blast, was in no doubt it was a terrorist attack, possibly by Muslim rebels from the country's south.
Hundreds of people have been killed since March when the Philippines military launched an offensive against Moro Islamic Liberation Front rebels (MILF).
"It's definitely a terrorist attempt," the foreign ministry spokesman, Mr George Reyes, said.
The Philippine Defence Secretary, Mr Orlando Mercado, said the ease with which rebels in the south slipped into Indonesia and Malaysia, both predominantly Muslim countries, was of concern.
The MILF denied any involvement and the Philippine foreign under-secretary, Mr Franklin Ebdalin, doubted the group was behind the attack.
"It is reported that Salamat [Moro Islamic Liberation Front chairman Mr Salamat Hashim] is very close to Mr Wahid. They treat themselves almost like brothers. So it's very unlikely that the MILF would do that thing," Mr Ebdalin said.
"The other angle we're looking at is maybe [the bombers] made a mistake . . . We have to wait for the result of the [Indonesian] investigation."
The ambassador, Mr Leonides Caday, and his driver had been in the ambassador's car just outside his residence when the bomb went off.
"The bomb was put in front of the house's gate . . . outside of the `parked car', said a police spokesman, contradicting other reports that it had been placed in a van. Mr Ebdalin said the ambassador's had been operated on and his life was not in danger.
The explosion killed a woman and a security guard. Two of the 18 people injured are in a critical condition, said a hospital spokesman.