Police say the man threatened to detonate the device during the attempted robbery, but did not get away with any merchandise.
He then fled in a black SUV and crashed in the 300 block of 15th Street before taking off on foot, police said, adding that he dropped the object he claimed was an explosive on the ground next to the SUV.
The bomb squad performed a controlled detonation of the object about 10:15 p.m., but police had not located the suspect. He is described as 5 feet 9 inches tall and wearing dark clothing. Police also released a surveillance image of him.
Officials did not say whether it was actually an explosive device.
Santa Monica police are asking people in the area to report any suspicious activity to 911.