The Enniskillen bomb may have been a carefully planned and premeditated attack, previously secret Dublin government papers have revealed.
Documents released under the 30-year rule show officials were tasked with gauging the thinking behind the Remembrance Sunday atrocity which claimed 12 lives and left another 63 injured.
One diplomat warned the bombing may have been calculated to provoke loyalist paramilitaries.
In a report for the Department of Foreign Affairs in Dublin five days after the attack, the senior official disputed the IRA and Sinn Fein's explanation for the bombing and huge loss of life.
"The operation may not have been a bungled 'maverick' action, as Sinn Féin and the IRA have suggested," a diplomat wrote.
"It may have been a carefully planned, premeditated attack on Remembrance Day, aimed at provoking a loyalist backlash, driving a wedge between the two governments and bringing the Protestant community and the British back together.
"There are also suggestions that it may have been a revenge attack for what the IRA regarded as the 'desecration' of its ceremony honouring its dead at the Derry funerals on November 2."
The document, released by the National Archives in Dublin, was marked "Analysis of Sinn Féin/IRA reaction to the Enniskillen bombing".
It said there had been unprecedented criticism of the atrocity from within republican ranks.
Prior to the 1987 Poppy Day bomb the official noted that an "esprit de corps" normally existed among hardline republicans which saw them stand by the IRA no matter how heavily the "flak" flew.
"Enniskillen, if not quite shattering the principle, certainly provided it with a severe jolt," it said.
The file on the bombing also revealed that Margaret Thatcher, prime minister at the time, viewed the attack as the "last straw" in a list of failures under the Anglo-Irish Agreement.
Dermot Gallagher, a senior Dublin government diplomat, wrote a confidential note on a lunch meeting with the PM's press secretary, Bernard Ingham.
"There was a deep sense of shock in No 10," he said.
The PM's office warned it would be difficult to manage Dublin's call for new extradition laws to be deferred in the wake of the atrocity.
"Enniskillen has hardened Mrs Thatcher's heart," Mr Ingham said.
Previously confidential documents on the fallout from the atrocity also showed SDLP leader John Hume initially believed the IRA could not have carried out the attack.
Two days after the incident he told a Department of Foreign Affairs contact that he subsequently changed his mind and that the Provos were to blame "in the knowledge that there would be civilian casualties".
"If so they had completely misread the Catholic view of Poppy Day," he said.
"Catholics deeply respected the act of remembrance and of course nearly every household in Ireland had a relative in one or both of the World Wars."
Mr Hume said the Protestants of Enniskillen had shown extraordinary Christian reaction, particularly Gordon Wilson, who said he would pray for the terrorists after holding after his daughter's hand as she died in the rubble.
"They (the IRA) had intended their actions to drive the Unionists back into the arms of the British and to drive a wedge in the Anglo-Irish Agreement," Mr Hume was reported to have said.
"Instead, they had inflicted a massive blow on themselves. That was the real basis for their 'apology'."
The documents were in files from the Department of Foreign Affairs 2017/4/70.