A powerful blast rocked central Budapest late on Saturday, injuring two police officers on foot patrol, police said in a statement on Sunday.
"The police have involved experts for the review of the area, interviewing witnesses and collecting data," the statement said.
"The local and expert examination of the origins of the explosion and the review of the damage is under way."
Security officials cordoned off the the busy Octogon intersection in the capital, evacuated visitors and told residents to leave the buildings nearest the blast, local media reported.
Eyewitnesses gathered at the scene discribing the situation.
"I am here on holiday and I was here in the hostel across the corner, and I was getting ready for a party," Polish tourist Olivia Sehildt told Reuters.
"Suddenly I heard a big boom...I was looking through the window and I saw a lot of cars coming, police, firemen, and a lot of people coming to the street... the windows were broken and nobody knew what happened."
Hungarian Kadosa Bencsy said his first thought was it may have been a terror attack.
"First I got scared that what I heard was what I had feared and terror has struck Hungary too," he said at the scene. "I have to say frankly that I have been fearing such a thing for a while...the possibility is there, that anywhere in the European Union it could happen."
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According to the police there were no further injuries while a government spokesman refused to make further comments on whether the explosion was a deliberate attack.
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The Budapest disaster management agency said that no fire occurred at the scene.
Hungarian Prime Minister Viktor Orban has been a vocal opponent of immigration into Europe and has campaigned for a referendum about migrant resettlement quotas on the premise that immigration increases the terror threat in Europe.
In a campaign leaflet to reject the quotas, Orban cited the Paris attacks last autumn and the Brussels and Nice attacks to underscore the perceived links between immigration and terrorism.