A huge car bomb blast killed at least 20 people Thursday in a densely populated Beirut bastion of Lebanon's Shiite group Hezbollah, a military backer of Syria's embattled President Bashar al-Assad.

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.

The Lebanese Red Cross said at least 20 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, caused heavy damage to buildings and set several cars ablaze.

The blast came a day after Hezbollah chief Hassan Nasrallah said his militant group was taking steps to ensure the security of the southern suburbs, after a July 9 car bomb in Bir al-Abed left dozens wounded.

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.

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.

Hezbollah security forces were deployed in large numbers around the scene.

"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 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.

"You, the pig Hassan Nasrallah, we send you our second powerful message because you haven't understood yet," said one member of the group calling itself the Company of Aisha Umm al-Muminin, the Prophet Mohammed's favourite wife.

Thursday's blast comes six weeks after a car bomb attack in the same area wounded more than 50 people.

Another little-known Syrian rebel group, the Special Forces 313 Brigade, claimed that attack and said it was in revenge for Hezbollah fighting alongside the Assad regime.

The mainstream rebel Free Syrian Army condemned the attack.

Lebanese leaders from across the political spectrum condemned the latest car bombing, and a day of mourning has been declared for Friday.

President Michel Sleiman said the "terrorist" bombing targeted all Lebanese, not just Hezbollah.

Former prime minister Saad Hariri, a Sunni leader and staunch critic of Hezbollah, said the attack was "part of a vicious terrorist scheme" targeting Lebanon.

UN Secretary-General Ban Ki-moon urged Lebanon's fractious political scene to stay united in a statement that condemned the bombing as "completely unacceptable".

"During this period of heightened tensions, the Secretary-General urges all Lebanese to remain united, to rally around their state institutions and to focus on safeguarding Lebanon's security and stability," the statement said.

Analyst and Hezbollah expert Waddah Charara, meanwhile, said Hezbollah's arch-enemy Israel could have been behind the latest car bombing.

"I think the attack is part of a war being waged between Israel and the Shiite movement, that recently brought on the Israeli soldiers' incursion into Lebanese territory," Charara said.

"The Jewish state and Hezbollah are currently exchanging explosive messages," he said.

In an interview on Wednesday, Nasrallah said Hezbollah was responsible for two explosions last week that wounded four Israeli soldiers just inside Lebanese territory.

Lebanon is deeply divided into supporters and opponents of the regime in neighbouring Syria.

Sectarian tensions in Lebanon, which was dominated militarily and politically for 30 years by Damascus until 2005, have soared as the Syrian conflict has raged on.

Thursday's blast was the deadliest in Beirut in the post-civil war phase, after the attack that killed former prime minister Rafik Hariri in 2005, which left 23 dead.

Hezbollah's Nasrallah is scheduled to speak on Friday in an event marking the anniversary of the 2006 war that pitted the Lebanese group against Israel for 33 days.