Seven died and a further 34 were injured in the blast which ripped through the bus in the tourist town of Burgas, Bulgaria.
According to the BBC, a Bulgarian official said authorities were examining CCTV footage from the airport where the attack took place, identifying a Caucasian man standing outside the terminal shortly before the blast.
Israeli defense minister Ehud Barak said that Iran-backed Hezbollah were to blame for the attack.
The immediate executers are Hezbollah people, who of course have constant Iranian sponsorship, Reuters quoted Barak as telling Israeli radio.
He added that the government will do everything to find the perpetrators and bring them to justice. Barak also denied that any early warnings were received, as claimed by Bulgarian President Rosen Plevneliev.
Out of the seven people dead so far, six were Israelis, who were part of a large tourist group which had flown in on a chartered flight.
Earlier, Israeli prime minister Benjamin Netanyahu released a strong statement saying Iran was behind the blast, which took place on the anniversary of the 1994 Hezbollah bombing which killed 85 people in Argentina.
All signs point towards Iran. Over the last few months we have seen Iran's attempts to attack Israelis in Thailand, India, Georgia, Kenya, Cyprus and other countries. This is a global Iranian terror onslaught and Israel will react firmly to it, said Netanyahu.
Israel has sent planes and doctors to Bulgaria to collect the dead and treat the injured.
One survivor, Gal Malka, told Israeli army radio: I was on the bus and we had just sat down, when after a few seconds we heard a really loud explosion. The whole bus went up in flames.
Another eyewitness of the incident said: People who survived the blast escaped through the windows, so as not to walk over corpses.
First-hand witness accounts added that after the bus went up in flames, people started crowding the scene. Decapitated heads were visible while some saw flying body parts, according to the BBC.