There was no immediate claim of responsibility for the blast.
The British foreign office confirmed that the ambassador escaped an explosion, without specifying whether it was a suicide attack or not.
"We can confirm that there was an incident in Sanaa this morning," a spokesman for the British foreign ministry in London said.
"There was small explosion beside the British ambassador's car. He was unhurt. No other embassy staff or British nationals were injured."
The spokesman said the British embassy would remain closed to the public for the time being and that Britain was working "urgently" with Yemeni authorities to find out what happened.
"We advise all British nationals in Yemen to keep a low profile and remain vigilant," he said.
Witnesses said that the bomber was a bit slow in targeting the ambassador's vehicle and a police car escorting the two-car convoy was partly damaged in the attack, which occurred about 600 metres from the embassy.
The attacker's body was reportedly torn to pieces by the explosion.
"Security officials collected the remains of the terrorist's body, which were strewn over a wide area, in order to determine his identity," the Yemeni interior ministry said.
Security was visibly tightened around the U.S. and British embassies following the attack. The area of the explosion was sealed off as Yemeni and British officials inspected the scene of the attack.
Monday's bombing is the first suicide attack in Yemen since March 2009 when a South Korean delegation was attacked while investigating a bombing a few days earlier which killed four South Korean tourists.
No one was killed or injured in that blast.
|Torlot was apparently unhurt in the attack on his convoy [AFP/British Embassy]
In 2008, two suicide bombers set off a series of blasts outside the heavily fortified US embassy in Sanaa, killing 16 people.
The attack was claimed by a group called Islamic Jihad in Yemen, which analysts said was linked to al-Qaeda.
Ginny Hill, an associate fellow at the Chatham House think-tank in London, said that Monday's attack was significant as it seemed to be targeting a the ambassador himself.
"There have been a number of attacks and attempted attacks on diplomatic buildings, western embassies and western companies, but this is the first attack on a high profile individual," she told Al Jazeera.
"The British have been taking a leading role here in Yemen since the start of the year. They have been helping to build the capacity of the coast guard and they have been working with an elite counter terrorism unit here.
"So I think they're seen as allies with the Americans and Yemeni government."
Yemen, the poorest country in the Arab world, is beset by serious political and administrative problems.
In addition to the conflict with the regional branch of al-Qaeda, Yemen's weak central government has struggled to contain separatists in the south and so-called Houthi fighters in the north.
The government and the Houthis reached a ceasefire agreement in February. But the separatist problems in the south show no sign of a resolution.