Officials closed down streets near the Israeli embassy, located in the World Trade Centre office complex in an upscale section of downtown Montevideo, after discovering the device.
The convincing-looking fake -complete with fuse, detonator and other elements found in a real bomb -- was detected some 70 meters (230 feet) from the building by bomb-sniffing dogs patrolling the area with their Republican Guard handlers.
After destroying the device, bomb brigade lieutenant colonel Alfredo Larramendi told reporters at a press conference that it "never posed any danger."
"It might have been put there to see the response time" of responders, or to size up the quality of the security of Israel's embassy," Larramendi said.