One man was arrested after the police in Derry yesterday found a Mark-16 mortar together with a firing tube in a garage attached to a house at Elmwood Terrace, in the Bogside.
In a planned search operation against dissident Republicans, police officers entered the house just after one o'clock yesterday afternoon.
Following the discovery of the device, 10 nearby houses were evacuated and many of the evacuated residents spent most of the afternoon and evening in the assembly hall of the nearby St Cecilia's College.
"Lives have unquestionably been saved because of the discovery of this device", a PSNI spokesman said.
"Although no explosives were found inside the mortar, it takes nothing away from the fact that terrorists were willing to put the lives of so many people at risk by attempting to conceal this in a heavily built up area. They showed absolutely no consideration for the safety of others and we are just delighted to have been able to put such a lethal weapon out of circulation," the spokesman said.
The last time a Mark-16 mortar bomb was used in Derry was in April 1994 when a mortar, fired at a passing police mobile patrol from inside the grounds of St. Columb's Church in Chapel Road in the Waterside area of the city, killed twenty year old police officer Gregory Pollock.
Last night the Mayor of Derry, described those responsible for yesterday's incident as "the great unwanted".
SDLP councillor Kathleen McCloskey said she was shocked by the discovery.
"As mayor of this city I totally condemn anybody who participates in acts such as this.
"To put this device in such a built-up area is total madness and whoever left it there obviously doesn't care about the elderly, the sick and the young people who had to be evacuated because of the alert."