The threat to the UK from international terrorism has been raised from substantial to severe - meaning an attack is "highly likely".
Announcing the move, Home Secretary Alan Johnson said although the threat had increased there was no intelligence to suggest an attack was imminent. But he urged people to be vigilant.
He added that it was not specifically linked to the Christmas Day plane bomb plot or any other incident, although it comes ahead of a major counter-terrorism conference in London next week.
Mr Johnson said: "The Joint Terrorism Analysis Centre (JTAC) has... raised the threat to the UK from international terrorism from substantial to severe. This means that a terrorist attack is highly likely, but I should stress that there is no intelligence to suggest that an attack is imminent.
"JTAC keeps the threat level under constant review and makes its judgments based on a broad range of factors, including the intent and capabilities of international terrorist groups in the UK and overseas."
He added: "The highest security alert is critical and that means an attack is imminent, and we are not at that level."
The minister said more measures had been taken to protect aviation since the alleged failed bomb attack on a plane at Detroit at Christmas. "We have a very adept and very focused counter-terrorism facility in this country and people should be reassured by that."
The Christmas Day bomb plot has moved the focus of the fight against terror onto the Yemen, where suspect Umar Farouk Abdulmutallab has reportedly claimed he was supplied with explosives.
The Home Office said that the change in threat level would not cause "any discernable difference" for members of the public taking flights or going about their normal business.
Rather than triggering additional security checks at airports or putting more police onto the streets, the new assessment will send a signal to police and security officials to step up their activities behind the scenes.
Copyright (c) Press Association Ltd. 2010, All Rights Reserved.
Source: PA via The Guardian