A previously unknown group believed to be a Syrian rebel cell said it carried out the attack which rocked the southern suburbs of the Lebanese capital yesterday.
The Lebanese Red Cross said at least 18 people were killed and 245 others wounded in the attack in an area between the Bir al-Abed and Rweiss neighbourhoods of southern Beirut.
The bombing, reminiscent of the frequent attacks during Lebanon's 1975-1990 civil war, sent a plume of black smoke into the Mediterranean sky, wreaked heavy damage to buildings and set several cars ablaze.
A witness told a Lebanese television channel that he saw a van drive past three times before its driver found a parking spot where he set off the blast.
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The explosion had the impact of an "earthquake", said another witness.
An AFP photographer saw vehicles on fire, scorched bodies and the entrance halls to two buildings in flames. Firemen used ladders to help residents escape their homes.
"Terrorism has struck the southern suburbs again," said Hezbollah's Al-Manar television, adding that the group was "paying the price for its position".
Hezbollah is a key supporter of Syrian President Bashar al-Assad and has this year sent fighters across the border to bolster government forces, which have been battling a deadly anti-regime revolt since March 2011.
The movement has become a hated foe of Syria's rebels, most of who are Sunnis, while Assad is a member of the Alawite offshoot of Shia Islam.
Shortly after news of the attack broke, an online video surfaced showing three masked men, two of them holding rifles, in front of a white flag inscribed with the Islamic profession of faith.
Yesterday's blast comes six weeks after a car bomb attack in the same area wounded more than 50 people.