SUSPECTED Islamic extremists struck a crowded area of central Algiers with a massive car bomb attack, killing at least three people and injuring 70 others, hospital sources said.
Police and troops immediately sealed off the area around the Novelty cafe where the blast took place, causing lunchtime panic in the city.
Unconfirmed reports said that a packed pizzeria was badly damaged by the bomb, which raised fears that Islamic militants waging war against the secular authorities are embarking on a new wave of urban bombings this winter.
An elderly woman who witnessed the devastating attack in the Larbi Ben M'Hidi street, still widely known under its former French name, rue d'Isly, said the car was driven up to the scene by a young man.
He parked it, got out and ran away," said the woman, still in a state of shock. "Afterwards, there was an enormous explosion."
Many ambulances and public security force vehicles drove to the scene. The explosion blew out windows in the area and damaged vehicles on one of the main thoroughfares in Algiers.
Old women in tears and clutching their heads in their hands implored police officers to let them through to the site to get news of relatives, but the roadblocks were still in place more than three hours after the blast.
Nearby residents in a state of panic climbed on to roofs and balconies as other people ran away. An employee of the privately owned daily newspaper Liberte, which has premises nearby, sustained head injuries from flying glass.
Hospital sources said that around half the injured were still receiving treatment by late afternoon.
The bomb blast came soon after the Prime Minister, Mr Ahmed Ouyahia, repeated a government claim that the authorities were largely on top of terrorism, and as the most radical of the extremist movements appeared to be seeking a comeback in the capital, which has been spared random blasts for some months.
The Armed Islamic Group (GIA) has recently reimposed a reign of terror over the Kasbah, the old quarter of the city, where armed men kill people, either by slitting their throats or by machine gunning them, sometimes in broad daylight.
On Saturday, gunmen killed five people, including two adolescents, on Saturday in the Kasbah, a warren of narrow streets. They fired at a group of youths in one of the busiest areas, killing two of them and wounding three others.
Moments later, they killed three young men, apparently strangers to the district, the daily Le Ala tin reported. These attacks came about two months after security forces killed a local GIA leader, Mr Amara Yacine, also known as Napoli.
The GIA has also reintroduced its ban on smoking and ordered women to wear the hijab, or Islamic veil, on pain of death.
During the summer, Islamic militants left bombs inside cafes and restaurants in a string of attacks, particularly in Algiers, leading the security forces to impose bag searches at the entrances.
On Saturday, a home made bomb killed a schoolgirl and wounded another at Douaouda, 30 km west of the capital, according to press reports.
The government has for a year been saying that Algeria now only faces "residual terrorism" and Mr Ouyahia recently stated that the Islamic gangs had been defeated.
"Terrorism is going through its final, crazy throes, certainly, but the last," the prime minister said. Nevertheless, armed gangs have in recent weeks stepped up murderous raids in Algiers.