Mughnieh, who was head of the militant group’s special operations unit, was wanted for his suspected role in a number of attacks, including the 1992 bombing of the Israeli embassy in Buenos Aires, which killed 29 people.
He was on the US State Department’s list of most wanted terrorism suspects.
Hezbollah’s Al-Manar television interrupted its normal programming on Wednesday to broadcast music to mark his death.
Syrian state television confirmed that one person had been killed in a car bombing late on Tuesday but did not identify the victim.
Witnesses in Damascus told AFP that the vehicle was blown up in a car park in the newly completed residential neighbourhood of Kfar Suseh at around 11 pm (2100 GMT) on Tuesday.
The rear of the Mitsubishi Pajero was entirely blown out by the force of the blast, an AFP photographer reported.
After the blast, police prevented journalists from getting near enough to the scene to see if there had been any casualties.
The windows of nearby buildings were blown in and four cars parked close by were damaged.