Bomb disposal experts tonight carried out a controlled explosion on a suspect vehicle abandoned in Derry the PSNI have said.
The area around the building on Bishop Street was evacuated after a telephone warning was received just before 7pm.
Dissident republicans opposed to the peace process are suspected.
Last October, the Real IRA claimed responsibility for a car bomb that exploded outside a bank in the city.
While 13 months ago the entrance to Newry courthouse was badly damaged in another dissident car bomb attack.
Homes and bars in the city centre were evacuated in the alert. The vehicle was left close to sheltered accommodation.
Pat Ramsey, SDLP Assembly member for Foyle, condemned those responsible.
“People in Derry are distressed and disgusted that something like this has happened in our city,” he said.
“Those responsible have frightened and forced vulnerable, elderly people out of their homes, they have closed hard pressed businesses and have damaged the image of our city.
“They have no mandate and they have no morals.”
Elderly residents of the Alexander House complex on Bishop Street were among those evacuated.
A police spokeswoman said the security operation was set to continue for some time.
She advised all motorists to avoid Bishop Street and the Diamond area.