Philippine police defused a bomb found in a rubbish bin near the US embassy in Manila Monday, authorities said, with officials blaming Islamic militants for what they called an attempted terrorist act.

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An improvised explosive device composed of a cellphone, blasting cap, nine-volt battery and 81-millimetre mortar bomb was found by a street sweeper about 200 meters from the embassy, according to Manila police.

National police chief Ronald dela Rosa said Islamic militants in the southern Philippines who have pledged allegiance to the Islamic State (IS) group were probably behind the incident.

"This is an attempted act of terrorism," Dela Rosa told a news briefing.

"Because of an ongoing police/military operation there, (the militants) have many casualties. We can theorise that this is a diversion to loosen our operations," he added.

The military began an operation last Thursday against the Maute group, which staged a deadly bombing in President Rodrigo Duterte`s home town in the southern city of Davao that killed 15 people in September.

The militants are holed up in an abandoned government building in the mainly Muslim rural town of Butig on Mindanao island. Troops have been firing artillery to flush them out.

Dela Rosa said he believed the Maute gang or the Ansar Khilafa Philippines, another southern-based group sympathetic to IS, left the bomb near the US embassy.

Police said the bomb was left early Monday by a taxi passenger, who stopped and threw the device into a trash bin. A street sweeper later found the package and reported it to police, officials added.

The bomb could have caused injury or damage within a 100-metre radius, Police said.

Dela Rosa said, the bomb had the same design as the device the Maute group used in the Davao attack.

"Unless we get hard evidence, by analysis we can theorise this can be linked to Maute because of what happened in Davao," he said.

The Davao bombing prompted Duterte to put the nation under a "state of emergency" that led to tighter security measures.

The southern Philippines is home to various extremist groups and a four-decade Muslim separatist revolt that left more than 100,000 people dead, according to government estimates.

Manila police chief Joel Coronel said authorities were coordinating with the US embassy to determine if the mission was the target of an attempted bombing.

The embassy thanked Police for their "quick and appropriate action".