Authorities across India were told to be alert for any signs of Hindu-Muslim clashes, and top officials called for calm.
Protesters planted black mourning flags across the city, and families of those killed prepared for funerals.
Y. S. Rajasekhara Reddy, the chief minister of Andhra Pradesh state, where Hyderabad is located, called the bombing an act of "intentional sabotage on the peace and tranquility in the country."
Manmohan Singh, India's prime minister, also condemned the attack, the second on a mosque in a year, and urged Indians to remain peaceful.
Breakthrough likely
Rajesh Sundaram, Al Jazeera's correspondent, said investigators suspect the blast is the handiwork of a foreign group.
Sundaram said the improvised device was exploded using a mobile phone as a remote detonator.
Investigators were examining evidence from the SIM card chip found in one of the phones used in two devices that did not detonate. Sundaram said they were hopeful of making a breakthrough soon.
These bombs did not go off because the SIM cards in the phones had expired, police said.
Motive
"One of the things which appears to have been done at many places in the country is to attack religious places so that bad blood develops between different communities," Shivraj Patil, India's home minister said Hyderabad.
Ajai Sahni, executive director of the New Delhi-based Institute for Conflict Management, said it is likely groups responsible for last year's blasts were behind this one too.
"At this juncture, there is nothing to suggest there is any deviation from past incidents," he said.
"Consequently, we will have to assume it is the same groups which were responsible for Malegaon and Jama Masjid. The objective remains the same -- to create suspicion that the attack was by Hindus and create a Hindu-Muslim polarisation and violence."