The man carrying the bomb, which exploded near a synagogue, was killed and a passerby was injured, according to police at the scene.
“It can now be confirmed that this was a terror attack,” police and Shin Bet said in a joint statement on Monday.
Sunday’s explosion came about an hour after US secretary of state Antony Blinken arrived in Tel Aviv to push for a ceasefire in Gaza that will end the 10-month-old war between Israel and Hamas.
There has been increased urgency to reach a ceasefire deal amid fears of an escalation across the wider region. Iran has threatened to retaliate against Israel after the assassination of Hamas leader Ismail Haniyeh in Tehran on July 31.
Israel has not claimed responsibility for his death.