Local residents near Aisha Mosque at Walsall, in the West Midlands, had been evacuated during the bomb scare early this morning but have now been allowed back home.
The police, however, said it had still not been established what the device exactly was.
"Officers are continuing to work hard to establish what the item is and how it got there but the incident is being treated as a hate crime although the motive for placing the item near to the mosque remains unclear," Superintendent Keith Fraser of West Midlands police said.
The bomb disposal experts had been dispatched to Rutter Street last night following the discovery of a suspicious package on the grounds of the Aisha Mosque.
The item was taken inside the building by a member of the public before emergency services arrived and cordoned off an area around the building.
They had then ordered the evacuation of around 39 homes surrounding the mosque and are still working on establishing whether or not the package contained an explosive device.
"We found a suspicious item which we did not consider to be serious but as a precaution we thought that we would call the police and bring this to their attention... We are not suspecting anybody, we are leaving it in the good hands of the police," he said.
There have been at least 10 attacks on mosques across Britain in recent months.
The spike in these suspected Islamophobic incidents is thought to be a backlash to the murder of soldier Drummer Lee Rigby on the streets of Woolwich in south-east London last month.
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