At least two people have been killed and scores injured after three blasts on the Underground network and another on a double-decker bus in London.
UK Prime Minister Tony Blair said it was "reasonably clear" there had been a series of terrorist attacks.
He said it was "particularly barbaric" that it was timed to coincide with the G8 summit. He is returning to London.
An Islamist website has posted a statement - purportedly from al-Qaeda - claiming it was behind the attacks.
US President George Bush told reporters at the G8 Summit in Gleneagles that "the war on terror goes on."
The Queen said she was "deeply shocked" and sent her sympathy to those affected.
Home Secretary Charles Clarke said the morning rush-hour blasts occurred between Aldgate East and Liverpool Street tube stations; between Russell Square and King's Cross tube stations; at Edgware Road tube station; and on a bus at Tavistock Square.
"We will not yield to these terrorists, we will find them, we will bring them to justice," he said.
Paul Woodrow, of the London Ambulance Service, is in Russell Square near the bus which exploded.
"At King's Cross station there is a rescue operation in the tunnel down on the line," he said.
"Although we cannot confirm casualties - it is too early - we are dealing with large numbers of casualties."
Metropolitan Police Deputy Assistant Commissioner Brian Paddick said the initial estimates were of 150 seriously injured and "many more" walking wounded. Police also said two people had died at Aldgate.
Ania Lichtarowicz, from BBC News, said a doctor who had been treating people in Tavistock Square said at least 10 people had died.
In other developments:
- The officer in charge of policing the G8 summit said many of the 1,500 Metropolitan Police officers in Scotland would be urgently redeployed to London
- New Olympics minister Tessa Jowell said celebrations to mark the homecoming from Singapore of the successful London Olympic bid team have been cancelled
- Pope Benedict said the blasts were "barbaric acts against humanity" in a message to the Archbishop of Westminster Cardinal Cormac Murphy O'Connor
- Mobile phone services across London were jammed with all major networks reporting problems as people tried to contact relatives and friends. A spokeswoman for Vodafone said the emergency services were being given priority.
Some 208 casualties were taken to the Royal London Hospital in Whitechapel, with 26 people admitted - 13 are in theatre and another three are in intensive care.
The city's St Mary's Hospital said it was dealing with 26 injured people, including four with critical injuries and eight in a serious condition.
Mr Paddick confirmed police were looking into whether the bus blast was the work of a suicide bomber.
But, he added: "It could as easily be an explosive device left on the bus as the work of a suicide bomber. We are not able to determine which it was yet."
London police chief Sir Ian Blair urged people to stay where they were and not to call emergency services unless it was a life-threatening situation.
He reassured the public that an emergency plan was in place and the situation was "steadily coming under control".
London Mayor Ken Livingstone, speaking from Singapore before flying back to the UK, said Londoners would not be divided by a "cowardly attack".
He said it was an "indiscriminate" attempt at slaughter with no consideration for age or religion.
All London Underground services have been suspended indefinitely and bus services in central London (Zone One) have been halted.
Early reports had suggested a power surge could be to blame for explosions on the Underground but this was later discounted.
Describing the bus blast in Tavistock Square, witness Belinda Seabrook said she saw an explosion rip through the vehicle.
"I was on the bus in front and heard an incredible bang, I turned round and half the double-decker bus was in the air," she said.
She said the bus had been travelling from Euston to Russell Square and was "packed" with people turned away from Tube stops.
"It was a massive explosion and there were papers and half a bus flying through the air." she said.
One caller to BBC Five Live said his friend had seen "the bus ripped open like a can of sardines".
Between Aldgate East and Liverpool Street tube stations
Between Russell Square and King's Cross tube stations
At Edgware Road tube station
On bus at Tavistock Square