The PSNI has confirmed that four live mortar bombs with the potential to cause mass fatalities were discovered in a van in Derry last night.
Up to 100 families were evacuated from their homes in the Brandywell area overnight as a result.
Police are continuing to question three men in their 30s about the incident.
PSNI Chief Superintendent Stephen Cargin said officers stopped a white van on the Letterkenny road, close to the Co Donegal border, at approximately 8.15pm.
A man in the van was arrested and a man on a motorcycle travelling directly behind it was also held.
Chief Supt Cargin said: "Police then found a white van with the roof open with four live mortar bombs primed and ready to go in that van.
"We believe that those weapons were destined for a police station somewhere in the Derry area and that they were designed to cause mass casualties or mass fatalities," he added.
Speaking on RTÉ's News at One, Supt Cargin said the dissidents drove a van carrying the explosives through a built-up area despite the risk they could explode at any time.
Two of the men in custody are aged 37 and the other is 35.
A petrol bomb and missiles were thrown at police as evacuations of the homes were carried out.
PSNI detectives dealing with the incident are linking it to dissident republican activities.
Speaking at the British Irish Parliamentary Assembly in Letterkenny, Taoiseach Enda Kenny praised the gardaí and PSNI for "their activity, their vigilance and their activity in bringing that potentially disastrous situation to a halt".
Sinn Féin's Martin McGuinness said: "There is no going back to the past. The community in Derry City and elsewhere simply will not allow it."
Elsewhere, police have said that a crude but viable explosive device was left outside a shop in Co Antrim.
Army bomb experts were called to Doagh Road in Newtownabbey in the early hours of this morning.
Police said the four-and-a-half-hour alert ended at about 6.20am.