Hizb Allah called the dead man - whom security sources have identified as a Lebanese driver for the Iranian embassy - a martyr and one of its "holy warriors", in accounts of the bombing on the group's television station.
"Hizb Allah laments one of its mujahideen," a presenter on the al-Manar station said, before reading a statement saying: "Hizb Allah mourns Ali Hussein Saleh, who perished in an explosion in his car this morning."
The group was quick to point the finger at Israel, saying in a statement: "All information available since this morning proves beyond a doubt complete Israeli responsibility for this heinous crime.
"This crime will not go unpunished."
Lebanon's culture minister, Ghazi al-Aridi, said the killing was related to Hizb Allah's role in ending Israel's 22-year occupation of south Lebanon in 2000.
"This young man is one of the men who had a main role in fighting the Israeli occupation and I think this action was deliberately aimed at eliminating him," he told Aljazeera.
Witnesses said the blast gouged a gaping hole in the ground, propelled the car about 10 metres and blew its driver to pieces. A passerby, whom witnesses and security officials initially thought had been in the car, was seriously injured, security sources said.
Members of Hizb Allah carry away the remains of the driver.
Security forces cordoned off the area and used bags to collect the dead man's body parts, which the force of the blast had thrown up to the second and third-floor levels of the surrounding buildings.
A senior security official said a bomb in the car ripped it apart as its driver drove away from his residence.
"He started the engine, got going and went about 100 metres, then it blew him up. It appears to be a well-planned operation," the source said.
Documents retrieved from the car identified the body as that of Saleh, a 42-year-old from the town of Brital in Lebanon's Bekaa valley, a traditional Hizb Allah power base.
Security forces strained to hold back crowds milling about the mangled wreckage as it was examined by a forensic team.
The Iranian embassy refused to discuss the incident or its ties to the dead man.
Senior Hizb Allah figures have been the targets of assassination attempts before, including the group's former leader Abbas al-Musawi who was killed by Israel in 1992.