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The explosion, which locals said left at least eight people dead, is the latest in a string of attacks launched in apparent retaliation to a new offensive by African Union troops seeking to capture bases from the Shebab.
Regional nations, whose troops are fighting in Somalia, have also warned of the threat of attacks on their own soil.
"There was a suicide attack involving terrorists at a hotel in Buulo Burde," security official Sulieman Adam told AFP, of the attack that took place late on Monday.
"Four of the attackers were also killed," he added.
AU soldiers, who are fighting the Shebab alongside Somali government troops, and who captured the small town from the Islamists last week, were reported to have been staying in the hotel that was attacked.
Residents said that at least eight people were killed in the attack, but there was no official toll.
"A suicide bomber drove his car packed with explosives into the hotel, and there was a big explosion, and then gunfire afterwards," said resident Moalim Mohamed Adan, saying eight people were reportedly killed by the gunmen.
Abdirahman Qalafe, who lives in a nearby village, confirmed the toll of eight, adding he had seen a military helicopter on Tuesday morning evacuate the wounded.
"The helicopter landed and took around 11 wounded people away," he said.
The Shebab claimed responsibility for another car bomb on Monday targeting an AU convoy just outside the Somali capital, boasting of killing seven including three foreigners, although the toll could not be independently confirmed.
Uganda and Kenya threatened
The UN-backed AU force this month launched a fresh offensive against Shebab bases, with the gunmen largely fleeing ahead of the assault, only to later stage guerrilla attacks.
UN envoy to Somalia Nicholas Kay said the offensive would be "the most significant and geographically extensive military advance" since AU troops started operations in 2007.
But Kay also warned the security situation had "deteriorated" in the last three months.
Shebab fighters once controlled most of southern and central Somalia but withdrew from fixed positions in Mogadishu two years ago.
But recent Shebab attacks have targeted key areas of government or the security forces, in an apparent bid to discredit claims by the authorities that they are winning the war against them.
Last month attacks included a car bomb at the gates of the Mogadishu airport, a major suicide attack on the presidential palace and a car bombing on a cafe close to the intelligence headquarters.
Both Uganda and Kenya, key contributors of troops to the AU force, have warned of the threat of fresh Shebab attacks in their nations.
Kampala on Tuesday said Shebab insurgents were planning to use fuel tankers as bombs, while Nairobi on Monday said it had arrested two men in the Kenyan port city of Mombasa, thwarting a "massive" car bomb attack.
The Islamists have carried out major attacks in both countries in retaliation for their actions in Somalia in the past.
Shebab bombers killed at least 76 people in Uganda