Dima Hamdan in Beirut: "The southern suburb is heavily guarded by Hezbollah". Photo: BBC

A Red Cross official told the BBC that 37 people had been hurt in the blast, in the Beir el-Abed area.

TV pictures showed vehicles on fire and a cloud of black smoke. No group has said it was behind the attack.

Rebels in neighbouring Syria have threatened to target Hezbollah, which intervened in the fighting there to support President Bashar al-Assad.

Two rockets hit south Beirut in May.

Tuesday's explosion in the city's southern suburbs took place in a car park near an Islamic centre; no-one was in the car at the time.

Dramatic footage broadcast by Hezbollah-run al-Manar TV showed firefighters trying to put out the flames.

The BBC's Dima Hamdan, reporting from the scene, described considerable damage to nearby buildings. Many shops were forced to close as their windows were shattered, she said.

"Everyone started panicking. Everyone was running left and right," local shopkeeper Carole Mansour told AFP news agency.

"I can't believe someone would do this on the first day of Ramadan," she added. Many Shia Muslims in Lebanon are beginning their Ramadan fast on Tuesday, other Shia and Sunnis on Wednesday or Thursday.

'Message'

Visiting the site of the blast, Lebanese Interior Minister Marwan Charbel said the explosion was meant to create a bigger schism between Sunni and Shia, but insisted that would not happen.

He was greeted by angry crowds, our correspondent says.

"This is a message, but we will not bow," Hezbollah official Ziad Waked told al-Manar, AP reports.

A Hezbollah MP told the BBC that it was too early to speculate on who was responsible for the bomb.

Fighters from the militant group were instrumental in a strategic victory by Syrian government forces in Qusair, close to the border with Lebanon, in early June.

Events in Syria are putting Lebanon's fragile peace in jeopardy,correspondents say, threatening the equilibrium which has held since the end of the civil war over 20 years ago.