Officers seize four primed mortars minutes before dissident republicans planned to blitz a police station in Northern Ireland, according to detectives.
Police Service of Northern Ireland (PSNI) officers closed in on a van close to Derry city centre in an apparent undercover operation.
Two men were detained at the scene and a third was held later in follow-up searches. All three are in their 30s.
More than 100 homes had to be evacuated overnight when the police moved in on the vehicle close to the junction of Letterkenny Road and Foyle Road, and the security operation was still going on on Monday morning.
Dissident republicans opposed to Sinn Fein’s peace process strategy have been under 24-hour police surveillance amid fears of new attacks in Londonderry, this year’s UK City of Culture.
At one stage last night, police diverting traffic away from the scene were attacked by people throwing stones. At least one petrol bomb was also thrown.
Police commander Chief Superintendent Stephen Cargan said he believed terrorists were just about to launch the attack, probably on a PSNI station in Derry – this year’s UK City of Culture.
East Londonderry MP Gregory Campbell claimed: “We were 10 minutes away from a disaster. That is how close we were to a really bad night in Londonderry.
“The mortars were ready to be fired. There could have been dozens of people killed.”
Security chiefs were obviously working on good intelligence and had mounted a surveillance operation to foil the attack, he said.
Raymond McCartney, a Sinn Fein member of the Northern Ireland Assembly, said: “The overwhelming majority of people in Derry will be relieved these weapons are off the streets. There is no place for these people who call themselves dissident republicans in the 21st century.”
Mr Cargan said the van had been stopped in Letterkenny Road and four live mortar bombs found.
“They were destined for a police station in the Derry. It was a reckless attack,” he said. “They were prepared to drive through a built-up area of the city to carry out this attack and cause mass fatalities.
“These devices were primed. They are crude home-made devices and there is no way people who made these bombs would be certain they would have hit their target. There would have been mass murder of police, and serious damage to property.
“Good police work prevented this. If these devices had not been intercepted we would have been looking at a completely different picture. It is a very worrying development. Dissident republicans want to take us back to a place no-one wants to go to.”