The 23-year-old was hit by a bullet in the shoulder as armed officers descended on a family terraced house in east London in the early hours.

He was later arrested under the Terrorism Act after being treated for the gunshot wound in the Royal London Hospital.

A 20-year-old man, thought to be his brother, was also held in the raid which involved 250 police officers, MI5 and bio-chemical experts.

The Metropolitan Police’s head of anti-terrorism, Deputy Assistant Commissioner Peter Clarke, said they moved in after "very specific" intelligence pointed to a terrorist threat. Surveillance had been in place for weeks.

DAC Clarke said: "The intelligence was such that it demanded an intensive investigation and response.

"The purpose of the investigation, after ensuring public safety, is to prove or disprove the intelligence that we have received.

"This is always difficult, and sometimes the only way to do so is to mount an operation such as that which we carried out this morning."

Detectives believe a plot was being hatched to use a chemical device in the UK.

Neighbours said they believed both the arrested men were British born Muslims.

An air exclusion zone was in place around the house in Lansdown Road, Forest Gate and a painstaking police search may take days. No other residents were evacuated.

The Independent Police Complaints Commission immediately launched an investigation into the shooting which will be overseen by Deborah Glass, the IPCC Commissioner for London and the South East.

Last year the watchdog was tasked with investigating the fatal shooting of Brazilian Jean Charles de Menezes by police at Stockwell Tube station.

Detectives do not believe the current suspected plot had any links to the July 7 bombings in London last year.

Police vans moved into the street silently under cover of darkness so that if there were explosives in the house, there would be no time to detonate them.

Officers, some wearing bio-chemical suits and carrying gas masks, then broke a ground floor window to get in to the house.

Friends of the two arrested men who went to see him in the hospital said he had been shot in front of his parents and sisters some of whom had to be treated for shock.

One friend said: "If you were making a bomb factory would you do it in the same house as your mother?. He was not armed. He’s not a terrorist. He is an innocent man and he didn’t deserve to get shot.

"He was an ordinary guy working to support his family."

The friends said he worked as a postman and van driver for Royal Mail, had previously worked for Tesco and as a pizza delivery man, and owned a Yamaha superbike.

A 24-year-old relative, who asked not to be named, said: "He went to the gym, he also worked out at home. He’s more homely rather than going out.

"He loves his motorbike and loves his fitness. If he’s a fanatic about anything it’s his fitness. Ever since I’ve known him he’s been religious. He’s been religious from a very young age. He is being portrayed as a Westernised person, that is not true.

"He was very close to his brother. They lived together. He got him a job in Tesco because he worked there first."

Another friend said both the arrested men had attended Rokeby School in Stratford, east London.

After the September 11 attacks the older brother started taking his religion more seriously, grew a beard and started praying five times a day, he said.

"When we were younger he was no angel. But he changed, we all just grew up. He chose to go on the right path. He prayed five times a day, he went to the gym every day and other than that he stayed at home.

"Every time he spoke he would say peaceful things. He would give advice to everybody. Out of all our crew he was one of the good ones, working and looking after his family."

Another friend said: "Going into someone’s house and shooting them in front of their mum, that’s not right is it?"

Prime Minster Tony Blair, who resumed operational control of the government this morning after a six-day holiday in Tuscany, was made aware of the raid before it happened and Home Secretary John Reid was kept informed as the raid was underway.

Following the police operation, neighbours described seeing a man wearing a bloodstained T-shirt being carried out of the house.