MI5 security officers are hunting a cell of British terrorists believed to have been sent to the UK by an al-Qa'ida commander to carry out Mumbai-style attacks.
The network is connected to Ilyas Kashmiri, a one-eyed Pakistani al-Qa'ida commander who has also threatened the Commonwealth Games, sources said.
Kashmiri is said to act under orders from Osama bin Laden and to have boasted that he had sent cells to attack Britain and Germany. He has claimed involvement in the 1994 kidnap of four western tourists in India alongside Omar Saeed Sheikh, the Briton who murdered the reporter Daniel Pearl.
Sources said Kashmiri still had links to terrorists in Britain, although no evidence had emerged that any had reached the stage of planning attacks.
Senior al-Qa'ida members associated with Kashmiri in Pakistan were killed in the tribal areas last month, including a Briton named as Abdul Jabbar.
A terrorism alert was prompted by a "campfire chat" in Pakistan in which Kashmiri allegedly told Ahmad Siddiqui, a German citizen, that he had already sent teams to Britain and Germany.
"An intercepted communication in Pakistan added to the concerns of intelligence agencies, but gave no further details," a source said. Siddiqui was detained in July and has been questioned by the Americans for two months.
Kashmiri (46) is described as 6ft tall and has a long white beard dyed red. He lost an eye fighting the Soviets in Afghanistan.
Seth Nye, from West Point's Combating Terrorism Centre in the US, said Kashmiri's "track record organising cells" made him "invaluable" to al-Qa'ida.
He has also been linked with David Coleman Headley, an American suspected of carrying out reconnaissance for the 2008 Mumbai attacks that left 174 people dead.
Meanwhile, in Hamburg, it has emerged that Siddiqui is an old friend of a man convicted in the 9/11 attacks.
Intelligence officials say he was a friend of Mounir el Motassadeq, who was convicted by a German court in 2006 of being an accessory to the murder of the 246 passengers and crew on the four jetliners used in the 2001 terrorist attacks, and also frequented the al-Quds mosque.
Motassadeq was found to have aided suicide hijackers Mohamed Atta, Marwan al-Shehhi and Ziad Jarrah by helping them keep up the appearance of being regular university students -- paying their tuition and rent -- though it was never established whether he knew of the planned timing, dimension or targets of the attacks.