A plot to blow up planes in flight from the UK to the US and commit "mass murder on an unimaginable scale" has been disrupted, Scotland Yard has said.
It is thought the plan was to detonate explosive devices smuggled in hand luggage on to as many as 10 aircraft.
Police are searching premises after 21 people were arrested. Home Secretary John Reid said they believed the "main players" were accounted for.
High security is causing delays at all UK airports.
The threat level to the UK has been raised by MI5 to critical after the arrests in London, High Wycombe and Birmingham.
Critical threat level - the highest - means "an attack is expected imminently and indicates an extremely high level of threat to the UK".
Three US airlines are believed to have been targeted.
Mr Reid said had the attack gone ahead it would have caused a loss of life of "unprecedented scale".
He said they were "confident" the main players were in custody, but neither the police nor government are "in any way complacent".
Prime Minister Tony Blair, on holiday in the Caribbean, paid tribute to the the police and the security services.
He said they had tracked the situation for a "long period of time" and had "been involved in an extraordinary amount of hard work."
"I thank them for the great job they are doing in protecting our country.
"There has been an enormous amount of co-operation with the US authorities which has been of great value and underlines the threat we face and our determination to counter it," he said in a statement.
BBC security correspondent Gordon Corera said the plot was thought to have involved a series of "waves" of simultaneous attacks, targeting three planes each time.
He also said the plan "revolved around liquids of some kind".
"Officials say the explosives would have been sophisticated and extremely effective," our correspondent said.
Meanwhile, at Heathrow Airport incoming short-haul flights have resumed, but long-haul services are seriously delayed. Several outbound services have been cancelled.
The airport is crammed with thousands of passengers, while at Stansted more than 2,000 people are queuing to pass through customs.
Metropolitan Police Deputy Commissioner Paul Stephenson said the alleged plotters had intended "mass murder on an unimaginable scale".
"We are confident that we have disrupted a plan by terrorists to cause untold death and destruction and to commit, quite frankly, mass murder," he said.
"We believe that the terrorists' aim was to smuggle explosives on to aeroplanes in hand luggage and to detonate these in flight. We also believe that the intended targets were flights from the United Kingdom to the United States of America."
Police had spoken to a "good number of community leaders to make them aware that a major operation was under way," he added.
Head of the Met's anti-terrorist branch Deputy Assistant Commissioner Peter Clarke said the investigation had had "global dimensions" and had seen an "unprecedented level" of surveillance.
The decision to take action had been taken on Wednesday night, he added.
According to BBC sources the "principal characters" suspected of being involved in the plot were British-born. There are also understood to be links to Pakistan.
BBC home affairs correspondent Andy Tighe said police sources had told him they had found "interesting items" which were being examined.
In other major developments:
- Houses in High Wycombe, Buckinghamshire, are evacuated by police
- US air marshals are being sent to the UK to provide extra air security
- The US Department of Homeland Security increased the threat level applied to US-bound commercial flights originating in the UK to "red" - the first time it has done this for flights coming in from another country
- The Home Office confirmed there had been meetings overnight and on Thursday morning of the Cabinet's emergency committee, Cobra, chaired by Home Secretary John Reid, to discuss the terror alert
- A spokesman for Number 10 said Tony Blair had briefed US President George Bush on the situation during the night
BBC home affairs correspondent Daniel Sandford said despite the arrests the threat level had been raised "in case there is some other sub-plot, back-up plot around this that the police aren't aware of".
Total: 21 people arrested
London: 'Majority' of arrests - exact locations not known
Birmingham: Two arrests
High Wycombe: At least one arrest
The Department for Transport set out the details of the security measures at UK airports.
Passengers are not allowed to take any hand luggage on to any flights in the UK, the department said.
Only the barest essentials - including passports and wallets - will be allowed to be carried on board in transparent plastic bags.
"We hope that these measures, which are being kept under review by the government, will need to be in place for a limited period only," the statement said.