The police activity centred on Haymarket, near Piccadilly Circus, throughout the morning. Bomb disposal experts disabled a car bomb in a Mercedes at 0200 BST.

Website reader 'Wayne' saw a fireman looking into the car just before 0200 BST before calling for more help. Haymarket was then cordoned off very quickly, he added.

Forensic officers examined Haymarket and the green Mercedes car was later removed for further examination. It was taken to a maximum security laboratory in Kent.

The examination of the Haymarket car will take some time, say police. CCTV evidence will play a key part in the investigation.

The streets were eerily quiet after police sealed off the Haymarket area. But DAC Peter Clarke said the area would have been very busy at 0200 BST.

Sonja Bakkes, who works in the Haymarket area, said people remained calm in response to the disruption. "No one's overly excited," she said.

Alan Bassett lives in a flat in Haymarket and walked out into the evacuated site. Police said there could have been "significant" loss of life had the bomb gone off.

Police say Haymarket is likely to remain closed for some time and severe travel disruption is predicted. Piccadilly Circus Tube station later reopened.

Scotland Yard said detectives from Counter Terrorism Command were investigating. Police later said nails, petrol and gas were found in the first car.

Home Secretary Jacqui Smith chaired a meeting of the government's emergency response committee, in her first full day in the job. She urged the public to be vigilant.

Later police closed Park Lane after reports of another suspicious Mercedes. The road reopened at 1930 BST. Police said later the car had also contained a bomb.