The device was discovered on an eastbound Jubilee Line train at North Greenwich in south-east London at about 11:00 BST.
North Greenwich station, which serves the O2 Arena, was evacuated but reopened at about 18:50 BST.
The Metropolitan Police Counter Terrorism Command is leading the investigation.
A Metropolitan Police spokesman told BBC London the device looked "real enough" for the controlled detonation to be carried out.
In a statement, the force said: "Specialist officers from the Met and BTP [British Transport Police] are in attendance and a controlled detonation has since taken place to ensure the item is safe.
"While we are keeping an open mind, the Met's Counter Terrorism Command is leading the investigation because it has the expertise to deal with incidents of this kind."
Canadian rock band Nickelback were performing at the O2 Arena despite the disruption on the Jubilee Line.
In a statement, the O2 said it remained open for the performance and urged people to also use other forms of transport such as the Thames Clippers, the DLR to Royal Victoria and the Emirates Airline to North Greenwich.
The current threat level for international terrorism in the UK is severe - meaning an attack is "highly likely".
A suspect device found on a London Underground train was destroyed in a controlled explosion.