A senior source said: "This is a new low -- this could have been the worst gangland atrocity in our history.
"The criminals responsible for this did not care for anyone's welfare including that of two completely innocent children."
The Herald has learned that the incident is linked to a major criminal trial.
However the occupants of the house are said to be "completely innocent" and have no involvement in crime.
It is understood that the gangsters broke the window before lobbing the bomb into the house. The distressed children -- who are both aged under 10 -- were removed from the room by their father and gardai were called.
The incident led to an evacuation of a number of houses on the street and the army bomb disposal team were notified and called to the scene. Army experts arrived at the house at 9.15pm and the scene was declared safe 40 minutes later.
Figures released to the Herald show that 53 of the 96 viable improvised explosive devices (IEDs) dealt with nationwide last year were discovered in the Dublin region.
Gardai are concerned about the situation and have launched a number of special operations against gangsters who have been making bombs.
Last Thursday in a completely separate attack, the south inner city family home of criminal Aaron Rattigan was targeted in a bomb attack that caused damage to the home of an innocent family.