Officers were called to the 600 block of East Hilton Street around 9:30 a.m. to inspect a piece of luggage found behind a home.
Inside a gray suitcase, they found the body of an adult male. Authorities have not yet determined how the man died.
Neighbors said the suitcase had been sitting in the alley overnight.
The discovery was made behind the home of Angela Alexander, who said she noticed the suitcase the night before while returning from work.
"I'm like I don't know what it is but it's a little scary that it's like that," Alexander said.
Alexander said the suitcase was in the alley as she drove past it and remained there as she entered her home.
"The suitcase was right there when I was driving, so I went around it. I walk in through the back to come into my house, and I told my husband I hope there ain't no body in there. He said don't worry about that, don't touch it," she said.
She added that the alley is often used for drug activity and said she was not surprised by the discovery.
Police are treating the case as a suspicious death. Investigators are still working to determine the cause of death and whether there was a motive for placing the body inside a suitcase.
The medical examiner will conduct an autopsy to determine how the man died, a process that authorities say could take some time.
Alexander said the incident has left her concerned about safety in the neighborhood.
"I don't know what to do. I'm ready to move now," she said.
Anyone with information is urged to contact the Philadelphia Police Department Homicide Unit at 215-686-3334 or leave an anonymous tip at 215-686-TIPS.