The BBC's Peter Hunt: An explosion like a clap of thunder

Police said the bomb had been placed next to the bar at the Admiral Duncan in Old Compton Street, exploding at around 6.35pm.

One witness described the scene as "absolute carnage", with several people blown out of the pub into the street. No warning was given.

Another witness said she had visited a barmaid from the Admiral Duncan, who was now recovering in hospital. The barmaid, Veronica, had approached a black hold-all bag in the pub 30 seconds before it exploded.

It was the third nail bomb attack in London in the past fortnight. Police are linking the explosions and said all the devices were of the same size and type.

An injured man flees the scene

A far-right splinter group, the White Wolves, later telephoned a BBC newsroom and claimed it was responsible for the Soho explosion.

The previous blasts, in Brixton and Brick Lane, appeared to target ethnic communities, and the White Wolves were one of several extreme right-wing groups that claimed they were behind those attacks.

Sir Paul Condon, Commissioner of the Metropolitan Police, told a news conference: "These are cowardly hate attacks.

"We will defeat the people responsible for these bombs. We will catch them."

Jack Straw: We are dealing with people who have no humanity whatsoever

Home Secretary Jack Straw said: "The British people will not be intimidated by this kind of outrage."

Apart from the two dead, four hospitals in the centre of London reported 13 seriously hurt - including two who had lost limbs - and 68 with minor injuries.

Sophie Holland, 17, who works in Old Compton Street, said she had visited the Soho pub's barmaid, Veronica, at St Thomas's Hospital.

"She saw the bag and she was worried about it, but was pouring a beer at the bar at the time," said Ms Holland.

"As she went to go towards it the bomb went off. She said there was a big bang and it was blinding for her, and her hearing was impaired."

Ms Holland was unable to give Veronica's surname, but said a friend had asked her to visit the barmaid and give her support.

An eyewitness, Jim Davies, said the scene was so bad it looked as though someone had "thrown a bucket of blood around".

"There was a massive bang," he said. "The pub was very busy - there must have been 40 people in there. It looked as though people were blown out into the street.

A fleet of 21 ambulances were called up, and the injured were taken to University College, Guy's, St Thomas's and Chelsea and Westminster hospitals.

Eyewitness Jim Davies describes the scene

One block away from the blast, in Soho Square, ambulance crews and paramedics set up an emergency field hospital.

Ken Murphy, a motorcyle paramedic with the London Ambulance Service, was first on the scene.

He said there were numerous casualties, including two with "traumatic amputation of limbs".

Two injured men stand outside the pub

Last Saturday's blast in Brick Lane, which injured six people, was at the heart of the Bangladeshi community in London.

Thirty-nine people were hurt the previous weekend in Brixton, which has a large black community.

The Pink Paper, a gay newspaper, this week warned readers to be on their guard against possible attacks.

Pink Paper editor Mike Ross said: "We are very shocked and upset and trying to understand why the gay community has been targeted.

The locations of the nail bombs

Scotland Yard's Deputy Assistant Commisioner Alan Fry said he was anxious to hear from anyone acting suspiciously inside or in the vicinity of the Admiral Duncan pub.

He added: "I would appeal to the public to remain vigilant. If you see any unattended package or bag, dial 999 and move away as soon as possible."

Friends or relatives worried about the injured can telephone Scotland Yard's casualty bureau on 0171 834 7777.

Anyone with information should contact the police, in confidence, on the anti-terrorist branch hotline on 0800 789321