Up to 10 people were killed and 15 wounded as the charge detonated at the historical gate of Bab Touma, a busy pick up point for taxis and buses.
“The bomb exploded as people were moving to go to Churches for Sunday mass. It exploded just outside the police station. There was a bus stop right beside it,” said a resident calling himself George who works in a hotel just a few streets away from the explosion. “I felt the explosion. The ground beneath me shook and I can see black smoke rising from the area.
“Terrorists are doing this,” said George, a Christian who, like many residents in Bab Touma lives in fear of the rebel fighters trying to gain control of the capital.
Encircled by thick rock historic city walls, the narrow alleyways and wooden roofed Damascene homes of the Old City had thus far remained largely insulated from the fighting that has reached the capital in recent months.
Hotels in the Old City are filled with Syrian citizens who fled their homes and had come to the area to seek shelter, said George.
The bomb detonated as UN peace envoy Lakhdar Brahimi met with President Bashar al-Assad in Damascus.
On Sunday Mr Brahimi urged the two sides in Syria’s conflict to declare unilateral truces for this week’s Muslim holidays after meeting President Bashar al-Assad.
“I appeal to everyone to take a unilateral decision to cease hostilities on the occasion of Eid al-Adha and that this truce be respected from today or tomorrow,” Brahimi told reporters.
On Saturday, Brahimi also pressed his demand for a truce in the 19-month bloodshed with Foreign Minister Walid Muallem and opposition leaders tolerated by the regime.
The foreign ministry said Muallem discussed with Brahimi “a halt to the violence … in order to prepare for a global Syrian dialogue, free of any foreign intervention.”
“Such a dialogue is the only way to emerge from the crisis,” it said.
Hassan Abdel Azim of the National Coordination Body for Democratic Change in Syria, a tolerated opposition.