A bus driver has been labelled a "selfless heroine" after risking her life to stop a bomb placed on her vehicle exploding outside Derry's main police station.

She managed to evacuate up to 10 passengers on the service, which was bound for the city centre, on Wednesday night and then drove the bus alone with a bomb on board for almost a mile to a less built-up area.

She had defied a masked man who said he was from the new IRA terror group when he boarded the bus at about 6.15pm on Wednesday. He had ordered her to drive the bus with an explosive device on board to Strand Road police station – the target of repeat bomb attacks by republican dissidents.

It emerged on Thursday that instead of taking the bomb along a three-mile journey into central Derry the driver found the nearest bus stop in a less built-up area. She then got off the bus and telephoned police.

Her actions were hailed on Thursday as the work of a "heroine" by local politicians, who condemned the republican terrorist group's actions. SDLP councillor John Boyle said: "This selfless heroine put the lives of her passengers and people living around ahead of herself."

He added: "Up to 10 passengers were traumatised by this incident and up to 40 families had to spend several hours out of their homes on a brutally cold evening. But thanks to this courageous woman there was no loss of life or injuries."

Army bomb disposal experts were called in to deal with what the Police Service of Northern Ireland later said was a "viable device".

Northern Ireland's transport minister, Danny Kennedy, said: "I want to praise the bravery of the bus driver who had to deal with this frightening situation."

The Ulster Unionist member added: "Attacks on public transport impact the entire community who depend on buses and trains to get to work, school, hospital and go about their daily business. The driver showed immense courage under very difficult circumstances."

Sinn Féin councillor Eric McGinley said those responsible for leaving the bomb on the bus "are going against the will of the vast majority of the people in this area who have indicated that they want to move forward without this type of disruption".

Security alerts involving improvised explosive devices have become almost a weekly occurence in Derry during the past few months as dissident republicans step up their armed actions in the city. So far, however, no one has been killed or badly injured in any of the attacks.

The use of a potential proxy to drive a bomb to a security force base will bring back memories in Derry of the 1990 murder of Catholic contractor Patsy Gillespie. He died in an explosion that also killed five British soldiers. He had been strapped into a van packed with explosives and was forced to drive the vehicle towards an army vehicle checkpoint while his family were held at gunpoint back in their Derry home.

The use of a so-called human bomb along with two other similar attacks on the same day provoked widespread condemnation throughout Ireland and beyond.