A mortar bomb which was intended to maim or kill may have been transported inside a sports bag, detectives have said.
The viable device was discovered close to Londonderry's main police station following a major security alert overnight.
A Police Service of Northern Ireland (PSNI) spokeswoman said the bomb may have been wheeled or carried to its launch point.
" Police believe the intended target was nearby Strand Road police station. The device had all the component parts to make it viable," she said.
The mortar attack was thwarted as Prime Minister David Cameron jetted into Northern Ireland for a major investment conference. It also followed the murders of two men in Belfast and Londonderry which were blamed on dissident republican extremists.
Up to 1,000 people were evacuated from their homes as army technical teams worked through the night to make the mortar safe.
Superintendent Stephen Cargin, who is leading the hunt for the would-be bombers, said it was fortunate no-one was killed.
" It is only by good fortune that we are not talking about loss of life or serious damage to property," he said.
"While the device will be forensically examined in due course, it is safe to say that the intent here was to kill or injure and create fear within the community."
Detectives from the PSNI's serious crime branch have released an image of the blue holdall they believe was used to move the bomb to Lawrence Hill.
As yet no group has been identified as being behind the attempted bombing but the finger of blame has been pointed at dissident republicans.
Mayor of Derry Martin Reilly said the small minority who continued with acts of violence and destruction did not speak for the vast majority of people in the city who were committed to peace and a positive future.
He added: "This latest attack, which put over 1,000 people out of their homes in the middle of the night, had the potential to kill or injure. Such acts will not be tolerated as we work for a new future for the city and region.
"These acts of violence continue to frustrate those of us committed to work for peace and reconciliation but it will not stop us from continuing with that good work."
Londonderry is the UK's City of Culture and, although it is a stronghold for dissident republicans, it has been largely free of terrorism incidents in recent months.
In March police thwarted another attempted mortar attack on Strand Road PSNI station when they stopped a van with four mortar tubes primed and ready to be fired through a hole in the vehicle's roof.