President Rugova and members of his entourage were not injured in the incident, but two passers-by were injured.
The explosion occurred while the motorcade of President Rugova was moving towards the government building, where Rugova was to meet the EU's High Representative for the Common Foreign and Security Policy, Javier Solana.
The Kosovo police stated that two passers-by were injured in the explosion, but other details about the incident were not released. An investigation is under way, the police said, without commenting on possible perpetrators or motives of the attack.
Rugova said that the attack was carried out by people who wanted to destabilise Kosovo and asked that they be punished most severely.
All leading Kosovo parties, as well as the Association of Kosovo Municipalities and the Kosovo Committee for the Protection of Human Rights and Freedoms, condemned the attack and called on citizens to remain calm.
This is the second attempt on the life of the Kosovo president. A hand grenade was thrown in Rugova's front yard in a similar incident last year.