The blast, the worst attack in Cairo for months, killed two police lieutenant colonels and a recruit, according to the foreign ministry.
Ajnad Misr, the Islamist militant group that carried out the last significant attack in Cairo, claimed responsibility for the blast in a statement posted on their official Twitter account.
“This new operation shows we can penetrate and reach the vicinity of the Ministry of Foreign Affairs…to destroy the officers of the criminal security agencies and make them taste some of what they have made Muslims taste,” it said.
“Operations of retribution and revenge by this blessed group will not stop,” said the group, whose name means Soldiers of Egypt.
The blast was the latest attack in a simmering insurgency against the U.S.-backed government, underlining security challenges facing President Abdel Fattah al-Sisi.
Sisi, who has just completed 100 days in office, has pushed through some badly-needed economic reforms such as a rise in fuel prices. But tackling Islamist militants, an issue that has dogged one Egyptian leader after another, is far from easy.
Egypt has faced rising Islamist militant violence since Sisi ousted Mursi last year after mass protests against his rule and cracked down on Mursi’s Muslim Brotherhood, which the government has declared a terrorist group.
One of the police officers killed in Sunday’s blast, Lieutenant Colonel Mohamed Mahmoud Abu Sareeaa, was a critical witness in a trial of Mursi related to a 2011 mass prison break, court and security sources told Reuters.
It was not clear if he was targeted or just happened to be at the site of the explosion.
The challenge of containing militancy has become more complex since Islamic State militants expanded their control over northern Iraq and eastern Syria in June and declared a caliphate, inspiring other militant groups including some based along Egypt’s border with chaotic Libya.
Islamic State established ties with Sinai-based Ansar Bayt al-Maqdis and has been coaching Egypt’s most lethal militant organisation, security officials and an Ansar commander told Reuters.
Smoke rose and people ran after Sunday’s blast along a sidewalk in the neighbourhood of Boulaq bu Eila, just behind the Foreign Ministry, located in a high rise building beside the Nile.
There was no damage to the Foreign Ministry building and work was proceeding normally, though security had been tightened, a source in the ministry told Reuters. Airport authorities said they were also taking greater precautions.
The last significant attack in Cairo was on June 30, when two policemen died trying to defuse bombs planted by Ajnad Misr near the presidential palace.
Sunday’s blast caused a tree to fall on a car. Blood stained a busy intersection beside a crowded market.
While the death toll was low, any attack in the capital is bound to cast doubt over the effectiveness of security forces, who have vowed to end Islamist militant bloodshed that has hammered the tourism industry, a pillar of the economy.
Sisi has repeatedly expressed concerns about militancy in Egypt and other parts of the Middle East.
Security forces have killed hundreds of Muslim Brotherhood supporters, arrested thousands and put top leaders on trial, severely weakening what was once Egypt’s most organised political group.
The Brotherhood says it is committed to peaceful activism, but authorities make no distinction between the Brotherhood and groups such as Ansar, which has in recent weeks beheaded several people it has identified as spies for Israeli intelligence, suggesting it has become more radical.
Despite several army operations Egypt’s military has struggled to tackle Ansar and other militant groups which have posed a challenge to authorities for decades.
The Egyptian state has crushed militant groups in the past but they often recover. In the 1990s, militants staged attacks against government officials and foreign tourists. It took then President Hosni Mubarak years to defeat them.
Egypt suffered other losses on Sunday. Six soldiers were killed after a military aircraft crashed due to a technical failure, the army spokesman said.