All other domestic flights were put on an "orange" alert -- one step below the highest.
U.S. Homeland Security Secretary Michael Chertoff told a news conference that the operation was "suggestive" of an al-Qaida plot, but the investigation was still underway.
"It was sophisticated, it had a lot of members and it was international in scope," Chertoff said.
U.S. counterterrorism officials said the scheme targeted United, American and Continental airlines.
"This plot was well advanced. ... They were in the final stages of planning for its execution," Chertoff added.
An intelligence official said the plotters were aiming for airplanes flying into major airports in New York, Washington and California, reported the Associated Press.
"We think this was an extraordinarily serious plot and we are confident that we've prevented an attempt to commit mass murder on an unimaginable scale," said Deputy London Police Commissioner Paul Stephenson.
U.S. Attorney General Alberto Gonzales said the operation could "potentially kill hundreds of innocent people."
The suspected terrorists reportedly were planning to bring the bomb components on board separately and then combine them on the aircraft to detonate the devices.
Chertoff said there was no indication that plotting was occurring in the United States as well, but "we cannot assume that this threat has been completely thwarted."
Flights, meanwhile, were delayed Thursday as passengers underwent extra screening. The U.S. government banned from carry-on baggage all liquids and gels, including toothpaste and makeup, although baby formula and medication were exempt.
Makeshift signs were erected at airports alerting the public to the change in security measures.