Three people have now died after a hand grenade was thrown into a Kenyan bar where patrons were watching a Euro 2012 football match, the Red Cross says.
Earlier reports said one person had been killed in the blast in Mombasa, but two victims died later in hospital.
One of those injured at the Jericho bar is being held as a suspect.
The blast comes a day after the US embassy had warned that there was an "imminent threat of a terrorist attack" in the area.
Local police chief Aggrey Adoli told the AFP news agency that 30 people were still in hospital with injuries from the blast, while the Red Cross put the number at 25.
"One of those wounded people is assisting us because he is providing contradictory statements. He is being held as a suspect," Mr Adoli added.
Earlier this week, Kenyan police arrested two Iranian nationals over suspected links to a network planning attacks in the port city of Mombasa.
Police also said they had recovered suspected bomb-making material in the capital, Nairobi, on Saturday.
The explosion happened at around 22:00 local time (19:00 GMT) on Sunday, a police source told the AFP news agency.
The bar was busy with people watching the quarter-final match between England and Italy in the Euro 2012 football tournament, witnesses said.
Along with the US, France had also warned its citizens to be "extremely vigilant".
US officials had also been told to avoid the area until 1 July.
In May one person died after explosive devices were thrown into a nightclub in Mombasa.
Kenya has seen a number of grenade attacks since sending troops into Somalia last year to fight the Islamist al-Shabab militia.
Earlier this year, the African Union force backing Somalia's interim government was boosted from 12,000 troops to nearly 18,000 to incorporate the Kenyan troops.