International media, Mr Papademos was undergoing surgery for abdominal and leg injuries at an Athens hospital.
Earlier media reported that he also had trouble breathing, but his life was not in danger and two of his guards were lightly hurt.
The media minister Nikos Pappas said, "We are shocked. I wish to condemn this heinous act."
Current Prime Minister Alexis Tsipras, who is attending a Nato summit in Brussels, has been informed of the incident and he condemned the assault on ex-PM, Mr Papademos, who served from 2011 to 2012.
A police source said, a number of people had been hurt but could not say if Mr Papademos himself was in the car at the time of the blast.
Mr Papademos, 69, a former Bank of Greece governor, was in an armoured Mercedes provided by the bank, which contained the blast and likely aggravated his injuries.
Further, he headed an interim coalition government at the height of Greece's fiscal crisis that in 2012 negotiated a massive write-down of the country's privately held debt.