Possible bomb-making material was found in the house, Sky News reported, while the Press Association news agency said the raid followed intelligence about a suspected plot against Britain rather than a foreign target.

Scotland Yard refused to comment on the reports.

A large number of officers -- more than 200, according to the BBC -- poured into the house at Forest Gate at 4.00 am (0300 GMT), where a single shot was fired.

A neighbour said he saw a man in his late 20s wearing a bloodstained T-shirt being carried out of the property.

The raid involved "the most police I've seen in my life," including officers wearing chemical protection suits, the witness told the Press Association.

The injured man, 23, whose wounds were not life-threatening, was taken to a nearby hospital, where he was later arrested on suspicion of being involved in plotting a terrorist attack.

The second man, aged 20, was being held at a central London police station, police said, clarifying his age after earlier giving it as 23.

Eight hours after the raid, scores of officers in protective clothing were still on the scene at Forest Gate, where a number of cordons were in place and roads closed. Official sheeting covered the raided house.

A five-mile (eight-kilometre) air exclusion zone was in force above the scene of the raid, police said.

The operation was not linked to the deadly bombings last July on the London transport network, police said.

But in a sign of its significance, Home Secretary John Reid has been kept fully informed since it started, a spokesman said.

Deputy Prime Minister John Prescott -- the most senior politician in the country while Tony Blair is in Italy -- interrupted a meeting to return to the prime minister's offices at Downing Street for an update on the situation.

British police were heavily criticised for shooting dead an innocent Brazilian on a subway train in London last July as part of an anti-terrorist operation mounted in the aftermath of the London bombings.