The blasts happened near a military intelligence building during morning rush hour. State TV showed burnt cars and two deep craters in the road.
The government blames the attack on "terrorists". The opposition says it was carried out by the government itself to discredit rebel forces.
The two sides are supposed to observe a ceasefire monitored by a UN team.
However violence has continued unabated across the country, with the restive city of Homs shelled again overnight.
The international peace envoy on Syria, Kofi Annan, said the Damascus blasts were "abhorrent" and counter-productive for all parties.
A first explosion shook the southern suburb of al-Qazzaz shortly before 08:00 (05:00 GMT) as people headed into work.
The blast was apparently aimed at attracting people to the scene and was quickly followed by a second, much bigger explosion, a local journalist said.
The explosion damaged the facade of a 10-story military intelligence building involved in the crackdown on the 14-month-old uprising against President Bashar al-Assad's rule.
It is part of a broader military compound of the Palestine Branch, one of the most feared among the more than 20 secret police organisations in the country, correspondents say.
It was originally set up in the 1950s to interrogate suspected Israeli spies. But over the past decade, it has evolved into the country's counter-terrorism unit, and is infamous for interrogations and torture, they say.
Large crowds gathered despite the security cordon, shouting slogans and chants in support of President Assad.
All the while, the emergency teams looked for body parts and bulldozers were at work clearing away some of the debris. The whole area looks like a wasteland.
One Damascus resident, who gave his name as Ahmad, told the BBC the blasts were the biggest explosions he had ever heard.
"I heard the two explosions clearly from my house. The whole of Damascus heard them. At first, I thought they were air strikes.
The head of the UN observer mission in Syria, Maj Gen Robert Mood, visited the site of the Damascus explosions.
Source: BBC News
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