A TIP-off from the gardai prevented a major mortar attack on a police station in Derry city.
Gardai believe the attack was being planned by members of the recently formed New IRA alliance, which was also responsible for the murder of prison officer David Black.
The van used in the foiled attack had a Dublin-registration plate but had not been stolen. Gardai think the van was probably bought in the capital in the past couple of weeks.
The alliance had previously used a recently purchased car from Dublin in the David Black murder last October.
Last night three suspects, all from Derry, were being questioned by the PSNI after a van carrying four primed mortars was intercepted at a roundabout in the city after travelling across the Border from Donegal.
Gardai are satisfied that the mortars had been manufactured on this side of the Border.
The intelligence that led to the capture resulted from an ongoing operation against the dissident terrorists by the two police forces.
The driver of the specially adapted Berlingo van had previously been questioned by gardai about the murder of Andrew Allen, a father of two who was shot dead by dissidents while living in a rented house in Buncrana in February last year after he had been forced by them to leave his native Derry.
The new terror alliance includes the Derry section of the Real IRA and the Republican Action Against Drugs outfit, a group of former Provisionals who had previously worked closely with the Real IRA.
Anti-terrorist officers said they believed the leader of the alliance in Derry was anxious to score a "spectacular" to maintain credibility with the bosses in other parts of the North.
The four mortars were fully primed and "within minutes of being launched" when the van was stopped on Sunday night.
The mortars had been fitted into the rear of the van, which was driven across the Border along the Letterkenny Road.
Chief Supt Stephen Cargin, of the PSNI, said the most likely target was the city's police headquarters at Strand Road.
"The roof of the van had been cut off and the mortar bombs were contained inside tubes with explosives packed into warheads," he said.
After the van was forced to a halt, dozens of armed officers emerged from concealed positions and arrested the van driver, who was alone. Also detained was the rider of a motorcycle travelling close to the van.
A third man was arrested at his home a mile away in the Creggan area at 5am yesterday.
"All three men are local, they are known to us and they are being questioned at the serious crime suite in Antrim police station", Chief Supt Cargin said.
More than 100 houses nearby were evacuated and occupants spent the night with relatives or were given temporary accommodation in community shelters.
In February 1985 the then RUC suffered its worst ever casualties in the Troubles when a 50lb mortar bomb landed inside Newry police station, killing nine officers and injuring 37.