The bomb went off soon after midnight, just yards away from the promenade at Torremolinos, which is lined with bars, restaurants and hotels and is popular with British tourists.
One person was treated by emergency services for shock after the blast, which shook the windows of a local hotel and left a small hole in the sand.
"There was practically no damage," a local government spokesman said adding that there had been no warning and no group had yet claimed responsibility.
The bomb followed four small explosions at holiday resorts on Spain's northern coast on July 20 which local authorities blamed on Basque separatists Eta.
Spanish police are on alert for attacks in the Andalusia area of southern Spain, after they arrested members of an Eta unit and found evidence that the group were planning attacks in the region.
The separatists has often set off mainly small bombs in Spanish resorts during the busy summer holiday season to target the tourist industry as part of its four-decade fight for an independent Basque homeland.
Sean Tipton, a spokesman for British travel organisation Abta, said that the blast should have little impact on tourism in the area.
"We have had, over the years, a history of terrorist attacks targeting Spanish resorts," he said.
"However, these have never discouraged British tourists from travelling to the country because they take a sensible and realistic view of the risks involved.
"Also over that time, no British tourist has been killed or seriously injured," he added.