Mohammed Aziouz, an 18-year-old student traveling in another bus nearby at the time of the late afternoon attack, told Reuters: "I was in a bus when I heard a big explosion. Then we heard gunfire."
"A moment passed. And then police wearing 'Ninja' balaclava hoods entered our bus and started checking identity papers. Those who didn't have them were taken out for verification. The smell of (explosive) powder was very intense."
The official APS news agency reported that the wounded were four Britons, two Lebanese, an American, an Algerian and a Canadian. All but one were released from hospital after treatment.
Residents said the bus was ferrying employees of Brown Root Condor, a joint venture of Halliburton subsidiary Kellog, Brown and Root and Condor Engineering, an affiliate of Algerian state energy group Sonatrach, Africa's largest company by revenue.
Police sealed off the scene 10 km west of the Mediterranean port city of three million.
Reporters, who later approached the residential and tourist area, heard two explosions. Residents said they appeared to be the result of work by bomb disposal teams, but there was no immediate confirmation of that.
Witnesses saw a police forensic team wearing white overalls enter the area.
There was no immediate claim of responsibility for Sunday's attack, but residents said they suspected Islamist rebels who have consistently refused peace overtures from the government.
Sporadic clashes between Islamist guerrillas and security forces normally take place in isolated rural areas of the oil- and gas-exporting Mediterranean country.
But on October 30, three people were killed and 24 wounded in near-simultaneous truck bomb attacks on two Algerian police stations, in what witnesses called the most elaborate assault by Islamist rebels in several years.
The apparently coordinated overnight blasts in Reghaia town 30km east of the capital and the eastern Algiers suburb of Dergana were the first bombings of police stations in Africa's second largest country in more than five years.
Islamists began an armed revolt in 1992 after the then military-backed authorities, fearing an Iran-style revolution, scrapped a parliamentary election that an Islamist political party, the Islamic Salvation Front (FIS), was set to win.
Up to 200,000 people were killed in the ensuing bloodshed. The violence has sharply subsided in the past few years.