An 18-year-old man has been arrested by Kent Police in the port area of Dover in connection with the bombing, Scotland Yard said.
Metropolitan Police Deputy Assistant Commissioner Neil Basu said that the arrest was “significant”.
At least 30 people were injured in the bombing yesterday at 8.20am on a District Line train at rush hour as it pulled into Parsons Green.
The teen remains in custody at a local police station and will be transferred to a south London police station “in due course”, cops said.
Mr Basu added: “Although we are pleased with the progress made, this investigation continues and the threat level remains at critical.”
The device is believed to have been home-made using a white bucket, Lidl bag, fairy lights and explosive compound – the “Mother of Satan” – TATP.
There were fears yesterday there could be further bombings as police raced against time to find the culprit and any accomplices.
Investigators have uncovered “CCTV of a person suspected of planting device”, according to reports by the BBC.
Mr Basu said: “The public should remain vigilant as our staff, officers and partners continue to work through this complex investigation.
“We are not, at this time, changing our protective security measures and the steps taken to free up extra armed officers remain in place.
“This arrest will lead to more activity from our officers. For strong investigative reasons we will not give any more details on the man we arrested at this stage.”
Prime Minister Theresa May raised the terror threat level to critical in the hours after the attack – which means another is expected imminently.
She said: “For this period, military personnel will replace police officers on guard duties at certain protected sites that are not accessible to the public.”
Met Police officers are continuing their massive manhunt today – and reassured: “we are only aware of one device”.
The Prime Minister said troops are being sent to guard nuclear power stations and other key sites and 1,000 armed police will be patrolling the streets.
ISIS has claimed responsibility for the attack, claiming a “squad” of jihadis was behind the attack designed to “rock London”.
It is believed the bucket bomb failed to detonate as the injured only suffered “flash burns” and no-one was killed.