The device, containing 600lb of fertiliser-based home-made explosives, was defused by army bomb disposal experts outside Forkhill in south Armagh.
Dissident republicans were being blamed for setting the bomb, which had a command wire that led across the border to a firing point.
Newry and Mourne police commander Chief Inspector Sam Cordner said the bomb was targeted against PSNI officers but had it been detonated it would have demolished nearby houses, killing the occupants.
As detectives launched a major investigation and forensic experts studied the device, Chief Inspector Cordner accused those who planted it of being reckless and not caring who they killed.
He said: “There could have been a devastating outcome to this incident. The actions of terrorist criminals in planting this device in the Forkhill area put local people and police officers at significant risk.
“Their actions were reckless and dangerous in the extreme. Their target may have been the police, but they did not care who they killed or injured.”
The alarm was first raised last Tuesday with a phone call to a local newspaper. Inspector Cordner said the location was “very, very vague”, covered a wide geographic area.
He said it was much later when the device was found at the side of the Carrie Road with a command wire leading across a field to a firing point in the Republic.
“Police officers were immediately put on the ground, cordoned off the area and moved people from the danger area.
“Twenty people were evacuated from six homes on Saturday afternoon, some of them were elderly, others families with numerous young children,” he said.
“The bombers were reckless. Had the device exploded the houses would have been demolished and those inside killed.”
Sinn Fein MP for Newry and Armagh Conor Murphy said he was extremely concerned.
“I challenge those who planted this bomb in the community to come forward and explain why they have done so. How is this furthering the struggle for Irish freedom?”
Meanwhile, the last remaining armed loyalist paramilitary groups in the North has pledged to decommission all its weapons within six months.
The Ulster Defence Association and the UDA’s breakaway faction in South East Antrim have given the commitment to the Independent International Commission on Decommissioning (IICD), North Secretary Shaun Woodward said.
The IICD’s latest report to the Government said both groups have now committed to doing so by February.
The undertaking comes after the Ulster Volunteer Forces and Red Hand Commando (RHC) put all their guns beyond use in June.