Police Maj. Soe Nyein told The Wall Street Journal the blast was near where radical Buddhist monk Venerable Wirathu was delivering a sermon on the outskirts of the country's second-largest city.
Wirathu gained notoriety for advocating the social exclusion of minority Muslims.
During the past year sectarian violence in Myanmar has left more than 200 people dead and 150,000 displaced with Muslims accounting for the vast majority of the victims.
Known as the "Buddhist bin Laden," Wirathu was unharmed by the Sunday night blast, reported Britain's The Independent.
Authorities said the explosion came from a car parked near the site where Wirathu was delivering his sermon.
Myanmar President Thein Sein met with leaders of the country's main religions to discuss sectarian violence, which has become a serious impediment to Myanmar's effort to attract Western investment.