Yobs lit a massive firework under a petrol tank and blew up two cars.
Residents heard what they thought were gunshots as the firework and the vehicles exploded.
Firefighters who attended the scene just after midnight yesterday said it was lucky no one was injured: "If someone had been walking past at the time they would have been hit."
Firefighters doused the flames and later found what remained of the firework.
Leading Firefighter Niall Howell said: "It was huge - 12 inches long by six inches wide.
"It looked like a mine and it was only by the grace of God no one was hurt."
Residents said it had the effect of a hand grenade and both vehicles were written off.
A Ford KA 2 was owned by Emma Goudman, 18, who works at St Dunstans home for war blinded in Ovingdean, Brighton.
The car was Miss Goudman's first vehicle and her pride and joy.
It was parked outside the home of her boyfriend Philip Law and his family in Bexhill Road, Woodingdean, Brighton.
It was alongside a Renault Laguna owned by Philip's brother Steve, 41, who works at Tesco's in Shoreham.
Mr Law said: "I jumped into my car and drove it down the road to get away from the KA.
"Then I saw flames coming from the front of my vehicle and decided it was time to get out."
His car was written off, too.
Mr Law's mother Pat, 61, said: "I was getting ready for bed when I heard what I thought were gunshots.
"I looked through the window, saw flames and shouted to Philip that Emma's car was on fire.
"He ran downstairs and phoned the fire brigade."
Mrs Law said she was furious: "I would like to get the little blighter in a room for a few minutes."
Some of the Law family went to Lewes for Bonfire Night celebrations.
Mrs Law said: "They were supervised and well organised.
"Lots of people enjoyed themselves but what do these kids get out of doing something like this?
"And what are they doing with such big fireworks?"
Another resident in Bexhill Road said: "Guns are outlawed yet you can buy these potentially lethal gunpowder bombs. It's madness."
Sussex Police investigating the attack said they too were concerned about dangerous fireworks. Inspector Steve Curry said: "At the end of the day these are explosives and have the potential to cause damage and injury."
He said police and Brighton and Hove Trading Standards were working hard to ensure such fireworks were being handled and sold responsibly by shops.
He said ten kilos of fireworks were confiscated recently in Brighton and the trader was going to be prosecuted.
Mr Curry said: "This issue is of huge concern to us and we will come down hard on anyone abusing the law."
Police were investigating the possibility that the Woodingdean firework was one of a batch of dangerous fireworks stolen from a Bonfire Night display at Cradle Hill School in Seaford.
Police warned the stolen fireworks were capable of causing fatal injuries.
Witnesses or anyone with information about yesterday's attack should contact Brighton and Hove police on 0845 6070 999.
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