The device was found in the luggage compartment of a bus west of the city. A second device abandoned near a light-rail station in west Dublin was deemed a hoax Tuesday morning.
Officials said Irish Republican Army dissidents opposed to compromise with Britain are believed to be responsible for the real and hoax bombs.
The 85-year-old queen, accompanied by husband Prince Philip, was greeted Tuesday by an Irish Army honor guard at a military airstrip outside Dublin. The queen then boarded a bombproof, bulletproof Range Rover to have lunch with Irish President Mary McAleese, who had lobbied for 14 years for the queen to visit.
"This is the start of an entirely new beginning for Ireland and Britain," said new Irish Prime Minister Enda Kenny. "I really do hope that the welcome she gets will be genuine and memorable for her and her party."
Irish and British officials were keen to stress that the queen's four-day visit to Dublin, Kildare, Tipperary and Cork would proceed as planned - accompanied by the biggest security operation in the Republic of Ireland's history.
The Associated Press contributed to this story
