GARDAI and the PSNI have foiled a plot by dissident republican terrorists to launch a massive bomb attack across the Border in the run- up to Christmas.
Armed officers from the two forces swooped on a house situated almost on the border and discovered it was being used to manufacture a homemade mix for a car bomb.
Last night two men and a woman, all from Dundalk, were being questioned by police.
Gardai believe the bomb was to have been used by members of the dissident group, known as ONH, in an attack on a big commercial centre, probably in Belfast at the height of the Christmas shopping season.
The group was formed by a Co Louth man, who was a former close associate of Real IRA founder Michael McKevitt. It has claimed responsibility for a bomb that exploded in Belfast's busy Cathedral Quarter last Friday night as 1,000 revellers and late night shoppers were being cleared from the area by police after a phone call warning gave the wrong location.
Police moved in shortly after midnight following a surveillance operation on both sides of the Border.
Officers from the Special Branch, Emergency Response Unit and National Surveillance Unit took part in the operation, which led to a raid on a premises at Kilcurry, Dundalk, at around 1am and the arrest of a 43-year-old man from Dundalk.
He was being held for questioning last night at Drogheda garda station.
PSNI officers then raided a house, which had been rented by a teenage couple, and discovered the bomb mix factory.
Inside the house they found a grinder, which they believe was being used to mix the ammonium nitrate fertiliser with sugar to pack the car bomb.
Two suspects, a 19-year-old man and 18-year-old woman, were arrested. They are both originally from Dundalk but have been living in south Armagh recently.
They were taken to the Antrim serious crime suite for questioning and were still in custody there late last night.
Follow-up searches were carried out later by the PSNI in the Faughart and Forkhill areas while gardai stepped up their inquiries around Dundalk.
A senior anti-terrorist officer said last night: "This is a highly significant find and there is no doubt that the operation has thwarted a major terror attack that could have killed innocent people and created mayhem in a busy commercial area."
Both forces have stepped up their surveillance on terrorist suspects in the past couple of weeks because of the increased activity by the dissidents.
Gardai have scored a number of spectacular successes this year in their war on the terrorists' logistical units, who are based in the South, and these have culminated in the seizure of arms and explosives.
But despite the arrests and seizures, PSNI Chief Constable Matt Baggott warned that the threat level in the North remained at 'severe', which meant an attack was very likely.
Garda Commissioner Martin Callinan and Mr Baggott reviewed the joint police operations, including the one leading to the uncovering of the bomb plot, during cross-Border police talks on the fringes of a meeting between the two justice ministers, Alan Shatter and David Ford.