Explosions ripped apart at least one double-decker bus and at least three areas in the subway tunnels. Subway stations at Edgware Road, King's Cross, Liverpool Street, Russell Square, Aldgate East and Moorgate were reportedly directly affected.
The mood across the city was shocked but calm as officials closed and evacuated the entire subway system.
Witnesses reported seeing dozens of people stumbling out of subway stations, coughing, and covered with soot. As many as 700 people may have been injured and 37 killed in the subway attacks, according to the Associate Press. The toll is expected to rise when authorities count the number of people killed in the bus explosion.
A statement on a Web site claiming to be from a group called the Secret Al Qaeda Jihad Organization in Europe said the group had carried out the attack in retaliation of Britain's involvement in the war in Iraq and Afghanistan, according to news reports.
"In response to the massacre that Britain has carried out in Iraq and Afghanistan: The heroic mujahedeen has undertaken a blessed attack in London," the statement said. "Now Britain is burning with fear, dread and dismay from north, south, east and west."
However the source of the statement could not be confirmed.
In a televised statement from Gleneagles, Scotland, where world leaders have gathered for the Group of Eight summit meeting, Prime Minister Tony Blair said it was "reasonably clear" that the explosions were acts of terrorism aimed to coincide with the G-8 gathering.
Mr. Blair said he planned to travel to London and then return to Scotland for the summit Thursday evening. In his absence, he said, summit participants would not "allow violence to change our societies or our values."
"The perpetrators of today's attacks are intent on destroying human life," he said. "The terrorists will not succeed. Today's bombings will not weaken in any way our resolve to uphold the most deeply held principles of our societies and to defeat those who would impose their fanaticism and extremism on all of us. We shall prevail and they shall not."
President Bush said the work of the G-8 summit shines through the actions of terrorists.
"On the one hand, you have people working to alleviate poverty and rid the world of the pandemic of AIDS and ways to have a clean environment, and on the other hand, you have people working to kill other people," the president said.
"The contrast couldn't be clearer between the intentions and the hearts of those of us who care deeply about human rights and human liberty, and those who kill, those who've got such evil in their hearts that they will take the lives of innocent folks. The war on terror goes on."
Roger Clark, who was riding on a bus to work in central London, said he had seen a double-decker bus on the street ahead of him suddenly explode.
"The top rear section of the bus exploded, ripping apart the whole of the bus," he told CNN. "It lifted about 10 meters above the bus."
The bus, he said, had been "packed" with people.
British Home Secretary Charles Clarke said there had been "terrible injuries."
"People are strongly advised not to travel into central London as the emergency services must be allowed to do their work in the most effective way that they can," Mr. Clarke said.
London's police commissioner said that since the attacks of Sept. 11, 2001, London's emergency services had been preparing for such an incident and that "the situation is being controlled."
He also warned people to "stay where you are" and not to call the police or ambulance services unless there was a life-threatening emergency.