A new warning system is to alert the public to the threat of attacks by al-Qaeda and other terror groups.
The threat level was reduced prior to the 7 July attacks
From 1 August, details of current threat levels will be published on the websites of the Home Office and MI5, Home Secretary John Reid announced.
The warning system will form part of the government's counter-terrorist strategy, code-named Contest.
Shadow home secretary David Davis welcomed the move, saying it was "eminently sensible".
Announcing the plans, the Mr Reid told MPs that the terrorist threat would only be overcome by "united action by all of us".
He said: "The importance of the public remaining vigilant at all times and reporting any suspicious activities is still the key message."
The system will show five different threat levels - low, moderate, substantial, severe and critical.
It is intended to simplify the current seven-tier system, which is not published in the public domain.
The home secretary revealed that the UK has been on a "severe general" level since August last year, equating to "severe" on the new scale.
He defined severe as the threat of a terrorist attack being "highly likely".
Some had lobbied for a system similar to that of the US, where alerts are colour-coded and range from green to red.
But that system has been criticised for being unduly alarmist and confusing.
The government is publishing two documents on terrorism to coincide with Mr Reid's announcement.
CURRENT THREAT LEVELS
A wide-ranging summary of the government's long-term strategy is being published by the Home Office. It aims to prevent terrorism and prepare for a potential attack.
The Department for Communities and Local Government will also publish a document on preventing extremism.
Mr Reid said he hoped the changes would "bring further transparency and understanding of the nature of the terrorist threat".
Giving the move his approval, Mr Davis said it would "increase both public confidence and public vigilance".
But he warned that it was "not just about strategies on a piece of paper" but was "first and foremost about delivery on the streets".
The Liberal Democrats' Nick Clegg said he too welcomed the move.
Mr Reid's announcement came after the cross-party Intelligence and Security Committee (ISC) called for a more transparent warning system in the UK in a report on the 7 July London bombings.
The committee highlighted that the threat level had been reduced from "severe general" to "substantial" prior to the London attacks.
Its report claimed the current system had provided "inappropriate reassurance" to the public in the absence of intelligence about a plot.
The report, published in May, said the system should be changed to recognise the limitations of intelligence gathering and "that attacks may be at the planning stage without being detected".