Indian police and bomb disposal experts took over the scene, sealing off district around the embassy in the capital.
A blast outside the Israeli embassy in New Delhi has damaged cars but did not cause injuries, police said.
The district around the embassy was sealed off on Friday after the explosion and police and bomb disposal experts took over the scene.
A police statement described it as a "very low intensity improvised device" that blew out the windows on three nearby cars.
"Initial impressions suggest a mischievous attempt to create a sensation," the statement added.
Israel is treating the event as a terrorist incident, an Israeli official told Reuters on condition of anonymity.
#BREAKING | Minor blast reported near Israeli embassy in New Delhi, fire department and intelligence officials at the spot. @MollyGambhir brings you the details— WION (@WIONews) January 29, 2021
Read full story: https://t.co/4yMOT6kgzW pic.twitter.com/oey2rvkF31
In February 2012 a bomb attack on an Israeli diplomatic car in Delhi injured four people.
The latest incident took place close to where Prime Minister Narendra Modi and other government and military leaders were attending an army parade.
The Indian capital is also on a security alert because of farmers' protests against government agriculture reforms that deteriorated into serious unrest this week.