Roadblocks brought area to a standstill, as forensic officers comb streets.
An explosion reported near a mosque is being treated as a terrorist incident, police said today.
Counter-terrorism officers have launched an investigation after residents heard a loud bang in Tipton, West Midlands, before nails and other debris were found.
The explosion occurred just one hour after Drummer Lee Rigby's funeral.
No injuries have been reported but several streets in the Binfield Street area have been sealed off, West Midlands Police said.
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An explosion reported near a mosque in the West Midlands is being treated as a terrorist incident, police said today
The explosion, which occurred just one hour after Drummer Lee Rigby's funeral, came from a car park at Kanz-ul-Iman Central Jamia Mosque in Binfield Street, Tipton
Police have evacuated an area outside the mosque after reports of a loud bang, feared to have been caused by a nail bomb
Locals were evacuated from their homes and dozens of worshippers - who had been heading to Friday prayers in the first week of Ramadan - had to be turned away
Bomb disposal from the Royal Logistics Corps arrive at the scene of the suspected bomb in Tipton. Police are now treating this as suspected terror incident.
Locals were evacuated from their homes and dozens of worshippers - who had been heading to Friday prayers in the first week of Ramadan - had to be turned away.
They have said the explosion came from car park at Kanz-ul-Iman Central Jamia Mosque in Binfield Street.
Unconfirmed reports have said it was caused by 'a nail bomb'. West Midlands Police said it was now being treated as a 'terrorist incident.'
A spokesman said: 'Police have been called to Binfield Street in Tipton this afternoon following reports of a loud bang.
'Officers were called at 1.06pm and are currently at the scene. A cordon has been set up and the immediate area is being evacuated as a precautionary measure while police investigate what caused it.
There are no reports of any injuries to anyone at this time. Some residents have reported finding debris in the area and finding nails.
'This is being investigated by forensic officers at the scene.
'An investigation is being led by the West Midlands Counter Terrorism Unit and it is being treated as a terrorist incident.'
The incident came on the day murdered soldier Lee Rigby was remembered at a private funeral service in Bury, Greater Manchester.
Tipton Green councillor Ian Jones said residents in the area described hearing a 'loud thud'. Councillor Syeda Amina Khatun said she was not aware of any previous attacks on the mosque.
'The explosion has gone off on the disused railway line behind the mosque,' she said.
'There are lots of police around so there must be want for them to be here. The whole estate has been blocked off. People are surprised that something like this has happened.
Rai Khan said he was one of three members of the public at the mosque when the nail bomb went off.
He revealed the place of worship would have otherwise been packed with Muslims - but Friday prayers had been put back by one hour until 2pm.
He added: 'There was me, the caretaker and one man was just pulling in to the car park at the time.
'As I only work over the road I was one of the first there.'
'As I only work over the road I was one of the first there.'
They said the explosion came from car park at Kanz-ul-Iman Central Jamia Mosque in Binfield Street
Roadblocks have brought the area to a standstill, as forensic officers comb the area.
'They decided to put back Friday prayers by one hour, otherwise there could have been mass casualties.
'There would have been hundreds of people arriving for the first Friday prayers of Ramadan, which is a very important date for us.
'It's chilling to think what could have happened if they had not decided to delay Friday prayers. You saw the damage a nail bomb can do at the Boston Marathon - to think that could have been us is very scary.
'A few of the windows were smashed and a couple of cars damaged. It could have been so much worse.'
Others suggested the 'attack' was intended to coincide with the funeral of Drummer Rigby - hacked to death outside military barracks in Woolwich, London, in May.
Tariq Mahmood, 40, said: 'It's very scary that this can happen, it seems tensions have been heightened since the Lee Rigby thing and you've got to consider whether it being his funeral today has anything to with it.
'Nail bombs can be absolutely lethal so you've got to think that somebody was intending to hurt, maim or kill.'
Fears: A bomb disposal robot is shown searching the car park of the mosque where the explosion was heard
Thorough: A police team can be seen carrying out a forensic search of a car park adjacent to the mosque
Terrifying: An eyewitness said windows were smashed and cars damaged by the force of the explosion.
Roadblocks have brought the area to a standstill, as forensic officers comb the area.
The incident comes just weeks after an explosive device was found outside another mosque in nearby Walsall, just eight miles away.
A large-scale evacuation was mounted around the Aisha mosque in Rutter Street after a homemade bomb exploded on June 22.
Police arrested a 75-year-old man on suspicion of causing an explosion likely to endanger life or damage property.
Mushtaq Hussain, chairman of the Kanzul Iman Mosque said he was inside the building at the time of the explosion.
He said: 'There was huge disruption and somebody told me that there had been an explosion.
'We immediately investigated and alerted police. We tried to remain calm as we weren't sure what was going on.
Close escape: Religious leaders said the car park would have been full of worshipers if Friday prayers had no been delayed
Lockdown: Police evacuated the area and took down evidence from locals as a counter-terrorism investigation began.
'It happened just after one o'clock which on a Friday is the busiest time of the day for our mosque usually.
'If it wasn't Ramadan there would be at least 200 people here but thankfully at the time there were only a handful of people and everybody escaped without injury.
'If what I'm hearing is correct and it was a targeted attack you can't help but feel unsafe, worried for your friends, family and your own life.'
Razmullah Khan, 27, a local resident who lives next to the mosque, said: 'I heard a loud bang and there was a lot of confusion.
'People were inside the mosque and ran outside to find out what was going on. We don't think anybody was hurt but there was a lot of damage to nearby walls, cars and windows and a number of items and debris are strewn across people's gardens.
'When the police eventually arrived they immediately told us to stay indoors but some others were evacuated and told to leave their homes.
'It's terrifying to be around, this is a place of worship not a war zone and with what happened in Walsall [when a bomb was found near to the Aisha Mosque, last month] things are becoming terrifying people are starting to not feel safe about walking down the streets.
The coffin of Fusilier Lee Rigby is carried from Bury Parish church in Bury, Greater Manchester. The explosion happened just hours after the funeral.
Hartahn Hussain, 23, who prays up to five times a day at the mosque said he was shocked by what happened.
He said: 'This is a multicultural and cohesive community, there is never any trouble here. What's happened today is completely out of the blue and it's taken us all by surprise.
'We're all completely shocked and each time I'll be going to pray in future I'll be worried and looking over my shoulder.'
There was condemnation of the attack from Muslim groups.
Mohammed Shafiq, chief executive of the Ramadhan Foundation, called on people not to allow terrorism to divide the community.
He said: 'I condemn the terrorist attack on the Kanz-ul-Iman Muslim Welfare Association Central Jamia Mosque in Tipton, West Midlands and urge all communities to remain calm and support the police to bring the people responsible to justice.
'Today has been a difficult day for our country with the funeral of Fusilier Lee Rigby taking place in Bury and this attack against Muslims and our mosques.
'Like we will not let terrorism divide us when Lee Rigby was killed, we will not allow these thugs and terrorists to divide Muslims from wider society.
'With Ramadhan happening for the next four weeks I would urge mosques to step up security and report anything suspicious to the police.
'Finally we will not be frightened by these terrorists from whatever background they come from, they will be defeated.'