A handgun found by police in a New IRA arms dump is to be tested to see if it was the weapon used to kill journalist Lyra McKee.
The weapon was part of a "significant" discovery, which included a bomb and ammo, made during searches of a 38-acre site near the Ballymagroarty district of Derry city yesterday.
Security sources expressed hope that the weapon might be that used to kill 29-year-old Lyra during rioting in the Creggan estate last year.
"It's the one that we want," a detective told Sunday Life.
The New IRA has a very limited amount of arms and the weekend find will come as a hammer blow to the gang.
Police carried out the searches following a series of arrests on high-profile dissident republican suspects in Derry.
Jude Macrory, the chairman of the New IRA political wing Saoradh in the city, was taken into custody last Thursday. He was previously questioned about the New IRA's 2019 bombing of Derry courthouse, but was freed without charge.
Saoradh spokesman Paddy Gallagher condemned the arrest, saying the PSNI forced entry into Macrory's home and seized several items.
Two weeks ago four other Saoradh members in Derry including prominent dissident republican Barry Millar (35) were taken into custody during raids before being released without charge. He is currently appealing a conviction of wearing paramilitary clothing and taking part in an illegal parade in support of the New IRA.
Republican sources in Derry say the PSNI's "significant" arms find will give rise to suspicions that the terror gang has a high-level informant in its ranks.
Last year cops acting on intelligence foiled two New IRA bomb attacks in the space of 48 hours. After a mortar was discovered aimed at Strabane PSNI station officers moved into the Creggan estate where they found a booby-trap trip-wire bomb.
"For every successful op the New IRA pulls off there are 10 screw-ups," said a Derry-based republican. "They are heavily infiltrated and they know it."
Outlining the police search operation in Ballymagroarty, PSNI Superintendent Gordon McCalmont said: "This operation was designed specifically to find items we believed were being stored in this area and which posed a serious and imminent risk to the community. They have thankfully now been removed and will be subject to rigorous forensic examination.
"The despicable criminals using this area for terrorist purposes are reckless and continually put our community at risk."
Hitting out at the New IRA, Foyle MP Colum Eastwood said: "How many times do the people of Derry have to reject those intent on causing murder and mayhem on our streets before they get the message?
"The use of violence in the pursuit of political goals is not only immoral, it is a failed strategy."
Justice Minister Naomi Long also condemned the dissidents, saying: "The police have undoubtedly saved lives today and their actions keep people safe. They do this without fear or favour, despite being under threat themselves.
"Their actions are in stark contrast to the callous and malicious behaviour of those who would seek to use potentially lethal weapons to control their own communities through fear and violence."