Four blasts hit London shortly before 9am, three of them in London Underground trains and one on a double-decker bus travelling through Bloomsbury. Police said that the confirmed death toll was 37 and rising. Some 700 commuters and tourists were injured, almost half of whom were taken to hospital by ambulance.

It was the UK's worst terrorist outrage and bore all the hallmarks of an al-Qaeda attack, similar to the Madrid train bombings of March 2004. An unknown al-Qaeda cell claimed responsibility in an unverifiable claim on an Islamist website and declared: "Britain is now burning in fear."

After breaking off from the first day of the G8 summit at Gleneagles, the Prime Minister returned to No 10 Downing Street, where he said in a solemn televised statement: "There will of course now be the most intense police and security service action to make sure that we bring those responsible to justice."

"The purpose of terrorism is just that, it is to terrorise people - and we will not be terrorised," he added. "This is a very sad day for the British people but we will hold true to the British way of life."

With the entire Underground system closed down and mainline services badly hit, tens of thousands of Londoners and suburban commuters faced a long trek home. More than half of the victims died in a blast under King's Cross and the mainline station above remained closed this evening, with police treating it as a crime scene.

Police said that seven people were killed in the first blast in a tunnel near Moorgate station in the City, 21 were killed in a second near King’s Cross and another seven died at Edgware Road station in West London. Two died on the bus that was blown up in Tavistock Place, near Euston, in Central London.

Brian Paddick, the Met's Deputy Assistant Commissioner, said that it was too early to say whether the explosions were the work of suicide bombers, saying only that police believed that four devices were responsible for the chaos. Scotland Yard did not receive any warning before the blasts and no group has officially claimed responsibility for the attack, he added.

The bombs, on a cold and windy morning, brutally shook London out of any lingering euphoria at winning the right to host the 2012 Olympic Games and brought the capital to a virtual standstill. West End theatres cancelled tonight's shows and dozens of other summer events were called off.

The attack also threatened to derail the G8 summit - but the G8 leaders decided to go ahead and Jack Straw, the Foreign Secretary, flew up to Scotland to stand in for Mr Blair and chair the meeting.

Mr Blair said before leaving Gleneagles: "It is important that those engaged in terrorism realise that our determination to defend our values and our way of life is greater than their determination to cause death and destruction to innocent people in a desire to impose extremism on the world."

The Queen, who hosted a banquet at Gleneagles last night but was said to be back at Windsor Castle, said in a statement: "The dreadful events in London this morning have deeply shocked us all. I know I speak for the whole nation in expressing my sympathy to all those affected and the relatives of the killed and injured. I have nothing but admiration for the emergency services as they go about their work."

The entire Underground network and mainline stations were quickly closed down as emergency workers put into action well-rehearsed plans to deal with terror attacks. More than 100 ambulances and dozens of fire engines were mobilised - although some 1,500 Met officers are in Scotland to guard the summit.

Questions were immediately asked about whether security forces had missed warnings as US intelligence agencies did before the September 11 attacks on Manhattan and Washington four years ago.

Sir Ian Blair, the Metropolitan Police Commissioner, conceded that the attacks were the sort of inevitable terror attack about which his predecessor, Sir John Stevens, had given warning.

"A co-ordinated effort is slowly bringing order out of the chaos," Sir Ian told Sky News. "Within a matter of hours peace will be brought to the streets of London and we will know what we are dealing with... Stay calm, stay where you are and trust the fact that a long co-ordinated plan is in action. London will return to normal as soon as possible."

Mr Paddick said that the first explosion happened at 8.51am between Moorgate, Liverpool Street and Aldgate East underground stations. He said the explosion was in the tunnel 100 yards from Liverpool Street station on either the Circle or Central line.

The second explosion happened at 8.56am in the King’s Cross and Russell Square area. The third was at 9.17am when an explosion hit Edgware Road Underground station. The blast blew a hole in a train on an adjoining platform. The fourth explosion happened at 9.47am on a bus in Tavistock Place.

Mr Paddick added: "The police service received no warning about these attacks and the police service have not received any claims of responsibility from any groups in connection with these attacks."

Russell Smith, the assistant chief ambulance officer, said that the service had treated patients with serious or critical injuries including burns, amputations, chest or glass injuries and fractured limbs. More than 100 ambulances and 250 staff were involved in the operation.

Survivors described scenes of total chaos. Mustafa Kurtuldu, 24, from Hackney, told Times Online at Aldgate East: "The train seemed to almost lift up off the rails. It sounded like an impact. It went white and there were flames outside the train, but they died down quickly."

Mr Kurtuldu said passengers broke out of the train and walked along the darkened track with other passengers past by what they believe were three badly damaged front carriages, one of which had been bent out of shape and blown out. They said that there were many injured in front carriages which appeared to take the bulk of the impact of the explosion. They had no idea whether it was a bomb or electrical explosion.

"I walked past one person lying on the tracks. I don't know if they were alright," he said.

Sarah Reid, 23, a student doing work experience, was on the carriage next door to the one which was struck by the same explosion. Speaking after the ordeal, having been led out down the track, near Liverpool Street station, she told how she saw a carriage ripped apart with the roof blown off.

"I think some people may have died," she said. "I was on the train and there was a fire outside the carriage window and then there was a sudden jolt which shook us forward. The explosion was behind me. Some people took charge. We went out of the back of the carriage.

Ms Reid said the explosion happened at around 8.50am but she was not able to get off the carriage until 9.30am. Describing being led away from the scene, she said: "A carriage was split in two, all jagged, and without a roof, just open. I saw bodies, I think."

The claim of responsibility - which could not be verified, was posted made on the al-Qal’ah - or Fortress - website by a group calling itself the Secret Organisation Group of al-Qa’ida of Jihad Organisation in Europe. The message, posted this morning, said: "The heroic mujahidin have carried out a blessed raid in London. Britain is now burning with fear, terror and panic in its northern, southern, eastern, and western quarters."

Professor Paul Wilkinson, a terrorism expert from St Andrews University, said: "The attack has all the trademarks of the al-Qaeda network. That is to say, the attacks are clearly aimed to cause casualties among the public and aimed at the transport network, which they have done before at Madrid.

"This shows that the police and security services are realistic and they have been warning that it is not so much a case of ‘if’ there will be an attack but ‘when’. Unfortunately, they have been accurate in that assessment."

The hour that shook London

0851 Bomb 1: Tube train between Liverpool Street and Aldgate

0856: Bomb 2: Tube train between King's Cross and Russell Square.

0917: Bomb 3: Tube train pulling into Edgware Road station

0947: Bomb 4: double decker bus at Tavistock Square