Five people died when attackers threw a grenade inside a night club in Garissa Town as revellers celebrated the new year in the early hours of Sunday.
The attackers struck Locus Night Club soon after midnight, otherwise Kenyans across the country defied the threat of terror attacks to welcome the new year with song and dance at churches, night clubs, restaurants, parks and street parties.
Security was tight in all major towns with intensified air, land and sea patrols.
The celebratory mood continued throughout on Sunday with families gathering at public beaches and parks and at churches and pubs.
In messages to FM stations, Kenyans praised Kenya Defence Forces operating inside Somalia as national heroes.
It was the second attack on Garissa Town since Kenyan troops crossed into Somalia in pursuit of Al-Shabaab insurgents, who are accused of carrying out kidnappings inside Kenyan territory.
In all there have been seven small-scale attacks inside Kenya since Operation Linda Nchi, now in its third month, started.
The suspected Al-Shabaab militants opened fire on guards manning the club before they fled on foot through Bula Sheikh residential area where they also shot an Administration Police officer who died on his way to hospital.
Locus Night Club is situated a paltry 100 metres from the heavily guarded Ministry of Immigration and Registration of Persons offices.
Witnesses told the Nation that four attackers in military uniform hurled a grenade before indiscriminately spraying bullets on hundreds fleeing from the blast at the packed club.
The fatalities include a General Service Unit officer, who was in the club, and an Administration Police officer stationed in Balambala district headquarters, who was hit by a bullet while seated in a taxi some 200m away.
Mr Peter Kitheka, a security guard at the club who spoke from his hospital bed, said a man in military uniform confronted him and asked him to open the main gate, but he noticed that the man was carrying a hand grenade and rushed to take cover in a nearby bush.
"I then heard a big blast before my hideout was sprayed with bullets. I thought I had escaped injury, but later on I felt a sharp pain on my chest and realised it was a bullet wound," said the guard.
"I heard people screaming as more bullets rent the air targeting those fleeing from the bar," said Mr Kitheka.
He said the incident happened around 15 minutes after midnight as revellers in jovial mood shouted to usher in the new year.
Garissa police boss Felix Munyambu said no arrests had been made, and urged the public to be on high alert.
"We had asked bar owners and taxi operators to close down business early but they ignored the request," said the police boss.
North Eastern provincial director of medical services, Dr Mukhar Omar, confirmed that five people had been killed and out of the 37 injured, 11 were in critical condition at the Garissa Provincial General Hospital.