The device has been made safe and the cordon around the area has been lifted.
The Barracric Road in Newry, Co Down where the device exploded and the railway line between Newry and Dundalk have reopened.
The PSNI say Army Techncial Officers were tasked to examine a suspicious object.
The ATO later confirmed that a viable explosive device had detonated in the area.
Parts of what is believed to be remnants of the device have been taken away for further examination.
No damage was caused and there have been no reports of any injuries as a result of the explosion.
Inspector Lorraine Dobson said: “I would like to thank the public for their cooperation during this operation.
“We are keen to hear from anyone who noticed any activity on the Barracric Road in recent days or anyone who has any information to contact Detectives in Ardmore Police Station on the non-emergency number 101.”