At least three people have been killed after a car bomb exploded outside a police station in the town of Thenia, 55km east of the Algerian capital, according to witnesses.
The explosion on Tuesday caused serious damage to the area surrounding the police station after police opened fire on the car preventing it from reaching the building.
"The explosion happened at 6.25am [0525 GMT] and thank God it didn't happen at 8am or we would have been killed without a doubt," Slimane, a witness, told the Reuters news agency.
His butcher's shop was among the buildings damaged by the blast.
An newspaper reported on Monday that security forces had uncovered a group in Corso, near Thenia, that was planning a suicide attack in Algiers.
Earlier this month attackers crashed an explosives-laden car into a police station in the town of Naciria, about 120km east of Algiers, killing four police officers and wounding 20 people.
Al-Qaeda in the Islamic Maghreb claimed that it had carried out the attack, as well as a double bombing in the capital Algiers that killed at least 41 people, including 17 UN staff, on December 11.
The group, formerly called the Salafist Group for Preaching and Combat, said that the December bombing was aimed at "the slaves of America and France".
Last year, it began aligned itself with al-Qaeda and began using its tactics, carrying out a series of high-profile suicide bombings in urban areas.
Previously the group had largely stuck to ambushing government security forces from its main bases in the remote forests of Kabylie.
Thenia lies on the edge of the Kabylie region.