A van bomb found near the Co Down border contained 600lbs of homemade explosive and was "ready to go", PSNI officers revealed today.
A senior officer confirmed the device was larger than had originally been estimated and could have caused devastation.
The white Citroen Berlingo van was spotted by a member of the public on Thursday evening after it was abandoned on a border road outside Newry.
The security operation on the vehicle only ended late last night and District Commander Chief Superintendent Alasdair Robinson today said it could have caused major loss of life had it detonated.
"The device contained two blue barrels with 125kg of homemade explosives in each one, and a detonator -- all the equipment which meant this device was ready to go," he said.
"To explain it, there was 600lbs of explosives.
"This was a very significant device. If this had exploded it would have caused devastation."
Dissident republicans opposed to the peace process are being blamed for the failed attack.
The same groups have been linked to the discovery of a smaller explosive device, plus a weapons cache, in north Belfast last night.
Newry's courthouse was damaged by a major car bomb in 2010, but Mr Robinson said the latest find was twice as big as the bomb used in that attack.
He said of the van bomb: "To put it in perspective - anyone within 50 metres of this device would have been killed and anyone within 100 metres, seriously injured."
The alert was raised when the vehicle was spotted abandoned on the Fathom Line road outside Newry on Thursday.
Mr Robinson said the likely target, and the reason for the device being abandoned, were unclear.
But the senior officers said the presence of regular police patrols had forced bombers to abandon devices in the past.
"We were alerted to this vehicle by a vigilant member of the public who noticed this van earlier in the afternoon and again around 4.30pm," he said.
"I would like to thank the public for their support and ask for their continued help. I would appeal to anyone who noticed this Citroen Berlingo van in the area on Thursday or even prior to this to contact us."
Asked about the scale of the threat posed by dissident republican groups, the chief superintendent said: "This is the third attack in the Newry area over the last few weeks however we have dealt with all three of these attacks.
"Officers are out in the community day and night, doing their utmost to ensure that the community is safe and we will continue to do this."
He said police had sealed off the cross border road within 12 minutes of being alerted to the suspicious vehicle.
But while some drivers had inadvertently driven past the bomb, others had continued along the route despite police warnings.
"Many police services would struggle to get an international border road closed in this timeframe," said the senior officer.
"There was some residual traffic following the closures and, while we made the public aware of the road closures and advised them to avoid the area, a few cars ignored our advice.
"We do everything in our power to protect human life."
The van and bomb have now been taken away for further forensic examination.
Ulster Unionist Danny Kennedy, who represents the area and who is also a minister in the Stormont government, said he believed the bomb was part of a plot to kill police.
"Clearly this was an attempt to lure a police patrol into that area, with potentially lethal consequences," he said.
Mr Kennedy said the dissidents were "dangerous and dedicated terrorists, who are determined to cause serious harm, injury and death to members of the security forces regardless of the consequences to local communities".
The Stormont regional development minister said he was very concerned at the increasing number of attacks planned and executed by republican dissidents around the border town of Newry.
Mr Kennedy paid tribute to the army bomb disposal team and the efforts of the police in dealing with the potentially lethal device.
But he said he feared it would be "only a matter of time" before the violent groups would claim the lives of security force personnel.
He appealed for the public to co-operate fully with the police.