Two people were killed and around 35 others wounded Monday after a bomb went off outside a shopping mall in the southern Philippine city of Cotabato, police said.
The explosion prompted officers to search the mall, leading to the discovery of another suspected bomb which they destroyed, said local police spokesman Chief Inspector Rowell Zafra.
A female street vendor and one man were killed, while many of the wounded were shoppers buying goods for traditional New Year festivities.
Three of the wounded were in critical condition, officials said.
Scattered debris including items sold for New Year celebrations such as horns made from cardboard and plastic, gifts and a bloody slipper lay at the mall's entrance where the bombing took place.
Windows of surrounding buildings were shattered by the blast, eyewitnesses said.
Investigators could not immediately say what kind of bomb was used or name any suspects.
However local army commander Major General Cirilito Sobejana told ABS-CBN television that an individual was seen carrying a box which he left in front of the mall. It exploded a few seconds later.
Sobejana said the bomb had the signature of a "Daesh group", referring to local Islamist extremists who have declared allegiance to the Islamic State (IS) group.
He said the military had some "leads" in the incident but did not elaborate.
- Insurgent groups -
The southern part of the largely Catholic Philippines has been rocked for decades by violent Muslim separatist insurgent groups including militants linked to IS.
More than 100,000 lives have been claimed by the rebellion, according to a government count.
The region has also suffered from banditry, bloody feuds between powerful clans and communist guerrilla activity.
In September and August, bombs went off in Isulan town, 77 kilometres (48 miles) south of Cotabato, killing at least three people.
Authorities said the main suspect in these blasts was the pro-IS Bangsamoro Islamic Freedom Fighters (BIFF) armed group.
The latest bombing comes as the southern Philippines prepares for a plebiscite in January for the creation of a Muslim autonomous area as part of an effort to end the separatist insurgency.
Many of the IS-linked groups have openly rejected these peace efforts.
Cotabato Mayor Cynthia Sayadi said that despite the bombing, "we will try to assure the people that... their right to vote (in the plebiscite) will be protected".
President Rodrigo Duterte put the southern Mindanao region under martial rule until the end of 2018 after pro-IS militants seized the city of Marawi last year.
Earlier this month, legislators approved an extension of this martial law until the end of 2019.