A hardline Real IRA splinter group is believed to be targeting the Royal Wedding.
The SAS spotted four Irish terror suspects as they photographed a number of sites and roads in London over a three week period.
"We have not ruled out the theory they were checking opportunities for the royal wedding," a senior UK government source said today.
Media reports have suggested that the cell may also have been preparing a terror attack at next year's London Olympics.
The four suspected terrorists were tracked in London over a three-week period as they photographed a number of sites near where the games will be held next year.
The source said that the four were suspected members of Oglaigh Na hEireann, a terror splinter group linked to the Real IRA that formed two years ago.
Two men travelled from the North – one from Co Monaghan – to meet two ‘sleeper’ associates based in London in February.
According to the UK government source the suspected dissident republican cell scouted a number of city sites as potential bomb targets.
The unit was tracked as they made their way around East London and there are fears that next week's royal wedding may be targeted, according to reports in Britain.
The four terror suspects were also caught photographing the Olympic Park and Stadium over a three-week period.
A surveillance team from the Special Reconnaissance Regiment (SRR), backed up by the 22 Special Air Service (SAS), spent weeks spying on suspected terrorists.
The UK government source told London’s Evening Standard newspaper: “”We believe the high-grade reconnaissance team was looking at possible action during the London Olympics but we have not ruled out the theory they were checking opportunities for the royal wedding.”
The men were monitored as they photographed key roads and buildings including the Olympic stadium. However, no arrests were made at this point.
Oglaigh Na hEireann are among the suspects in the murder of Constable Ronan Kerr (25) who was killed by a bomb put under his car in Omagh on April 2.
Intelligence to date has suggested that Oglaigh Na hEireann and other dissident Republicans are not aiming to launch mass-casualty attacks but continue to target police and military targets.
The royal wedding and the Olympics have now been added to this target list.
The threat level posed by dissidents in Britain was scaled up from “moderate” to “substantial”, by the Home Office in London last September – “moderate” meaning an attack is possible, but not likely, and “substantial” meaning it is a strong possibility.
The head of MI5 Jonathan Evans has also warned that dissident republicans could attempt to mount a new wave of terrorist attacks on the British mainland.
He said there had been a “persistent rise” in “activity and ambition” by dissident groups in the North over the past three years.
Last September the Real IRA publicly threatened to target banks and other financial institutions in the City of London, accusing them of “financing Britain's colonial and capitalist system”.
Oglaigh na hEireann is the most active of the paramilitary groups recently operating in the North and is made up of former members of the Real IRA and the Continuity IRA.
The organisation has between 80-100 members in Belfast drawn from the Provisional IRA, Real IRA and INLA and new recruits.