Construction workers were digging a new drainage basin near a Hindu learning center on Jalan Trengguli, in East Denpasar, when their tools struck a large stone structure one metre underground, the Jakarta Globe reported.
The crew then excavated a large stone plate, the first of many discovered at the site.
"I immediately reported the finding to the [local] archaeology office," said Ida Resi Bujangga, the owner of the center, yesterday.
The Denpasar Archeology Agency took over the excavation and uncovered an 11-metre-long structure.
"We will continue the excavation until [the whole structure is revealed]," said Wayan Suantika, an official with the agency.
Suantika told reporters that judging by the square structure's similarity to ancient temples found in East Java, it likely dates back to the 14th Century, the paper said.
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"The strengthener layers in between the stone plates were another characteristic usually found in 13th or 14th Century [structures]," he said.
Local residents also found ceramic wares and stone plates at the site, Suantika said.
"This discovery is the largest stone temple found in Bali," he added.
The Wasa Temple, which was uncovered in Gianyar in 1986, is 11 metres long and 10 metres wide.
Bali archaeologists later found buried 16 sarcophaguses in 2010 in Gianyar.
The island is home to most of the Hindus in Indonesia, a country with the world's biggest Muslim population.