There has been no claim of responsibility for the car bomb attack near a Shia shrine and a security checkpoint in the neighbourhood of Sayeda Zeinab on a road to Damascus airport.
General Bassam Abdel Majid, Syria's interior minister, told state television that all the victims were civilians.
"A counter-terrorist unit is trying to track down the perpetrators," he said.
Al Jazeera's Hashem Ahelbarra, reporting from Damascus said said it was not clear if the bombing was remotely detonated or carried out by a suicide bomber.
Ali Sadreddine Bayanouni, the exiled head of the banned Muslim Brotherhood, said the attack could be the work of extremist groups or part of a "struggle between security forces".
"The security agencies have set up terrorist groups and sent them to neighbouring countries like Lebanon and Iraq. I don't rule out that they have slipped from their control and are carrying out such acts," he told the AFP news agency from Saudi Arabia..
"There is a mood of oppression in Syria and this breeds extremism," he said.
The blast was the deadliest since a spate of attacks in the 1980s which were blamed on the Muslim Brotherhood.
The administration of George Bush, the US president who criticised Syria as being part of an "axis of evil", was among those who spoke out against Saturday morning's attack.
Condoleezza Rice, the US secretary of state, condemned the bomb attack which killed 17 people in the Syrian capital, Damascus, as "concerning".
"I just learned this morning of the bombing in Syria. I don't think we know [who did it]. Obviously any activity by extremists is concerning," she told reporters on Saturday.
|The EU condemned the bombing with "utmost firmness" [AFP]
Sean McCormack, a US state department spokesman, said: "This attack is particularly abhorrent as it comes during the holy month of Ramadan. We extend our deepest sympathies to the victims and their families."
Nicolas Sarkozy, the French president, and current holder of the rotating EU presidency condemned the attack with "utmost firmness".
A strong light "must be shed on this terrorist act. Those responsible must be found and brought to justice," the French president said in a statement.
David Miliband, Britain's foreign minister, said that the attack, along with another at a market in India, were "a devastating reminder of the prevalence of terrorism, and the willingness of some to kill innocent people to achieve their goals".
Dmitry Medvedev, the Russian president, sent a message of condolence to Bashar al-Assad, the Syrian president, calling the attack "a brutal and ugly crime".
While King Mohammed VI of Morocco, condemned the "vile terrorist attack".
The monarch said he had "learnt with consternation and deep sorrow the news of the vile terrorist attack," and expressed his "firm condemnation" as well as his "complete solidarity with the fraternal Syrian people at this difficult moment".
The attack was the first bombing in Damascus since the assassination of Imad Moughniyah, military commander of the Lebanese Hezbollah group in February. Hezbollah blames Israel for that attack although Israel denies any role in the killing.
Last month, a senior military aide to Bashar al-Assad, the president, who was also the International Atomic Energy Agency's main Syrian contact, was shot dead in northern Syria.