Magdy Mahmoud Mustafa el-Nashar, 33, who was arrested in Cairo, denied any role in the attacks, the Egyptian Interior Ministry said in a statement. He was taken into custody after the July 7 transit bombings and was being questioned, it said.
No charges have been filed against him. London police said a man has been arrested in Cairo, but they would not confirm his name or characterize him as a suspect in the attacks that killed at least 54 people, including four bombers.
Also Friday, police in Leeds raided a shop selling Islamic books and DVDs just blocks from where at least two of the four suicide bombers lived, and they seized materials.
CBS News Correspondent Elizabeth Palmer reports the police investigation is evolving very fast, but that's little comfort to Britons who heard London's police chief tell them today that another attack remains a strong possibility.
Muslim leaders have said the young bombers might have been inspired by radical literature. It was not immediately clear whether any of the four bombers had links to the shop, but neighbors speculated that the owner or manager may have met the suspects there.
An earlier search of a flat in Leeds rented by el-Nashar found evidence of explosives similar to those used in the failed 2001 shoe-bombing plot involving Richard Reid, according to The Times of London.
U.S., British and Egyptian officials had been in contact concerning el-Nashar following the blasts, according to an Egyptian government official who spoke on condition of anonymity because he was providing information not in the ministry's statement.
El-Nashar was vacationing in Egypt and had intended to go back to Britain to continue his studies, the ministry said, without specifying the date he was taken into custody.
"El-Nashar denied having any relation with the latest events in London. He pointed out that all his belongings remained in his apartment in Britain," it said.
British and FBI officials had been looking for el-Nashar, who recently taught chemistry at Leeds University, north of London.
Leeds University said el-Nashar arrived in October 2000 to do biochemical research sponsored by the National Research Center in Cairo, Egypt. It said he earned a doctorate May 6.
FBI agents in Raleigh, N.C., had joined the search for el-Nashar. North Carolina State University spokesman Keith Nichols said a person named el-Nashar studied there as a graduate student in chemical engineering in early 2000.
Detectives who searched el-Nashar's flat found signs that quantities of a compound called TATP, or triacetone triperoxide, had been converted into a powerful explosive, the Times of London reported.
In 2001, Reid used an improvised shoe bomb rigged with TATP, which is difficult for bomb-sniffing dogs to detect, when he tried to board an American Airlines flight from Paris to Miami and blow it up over the Atlantic. Reid was subdued by passengers when he tried to detonate the explosive. He pleaded guilty to U.S. charges and is serving a life sentence.
TATP is a highly unstable explosive made from commercially available chemicals.
Terrorists "like it because its ingredients are easy to obtain and difficult to detect," explosives expert Hans Michels tells Palmer.
A spokeswoman for London's Metropolitan Police refused to comment on the report or say what type of explosive was used in the attacks.
Andy Oppenheimer, an explosives expert with Jane's Information Group, said TATP is strong enough to have caused the damage wreaked by last week's bombs.
But he added that making such a highly volatile explosive stable enough to carry out closely synchronized attacks would have required advanced knowledge of chemistry. Police say the three subway blasts happened within a minute.
The New York Times and the British Broadcasting Corp. also reported that TATP was found in a search of a Leeds home.
Earlier, Metropolitan Police Commissioner Sir Ian Blair said investigators were hunting the organizers of the London transit attacks — perpetrated by what he called "foot soldiers" — and confirmed police were focusing on a Pakistan connection.
Three of the bombers who carried out last week's terror strikes were Britons of Pakistani descent. Pakistani intelligence officials said Friday that local authorities are looking into a connection between one of the three and two al Qaeda-linked militant groups in that country.
Blair told the BBC that police believed they would discover an al Qaeda connection to the blasts.
"What we expect to find at some stage is that there is a clear al Qaeda link, a clear al Qaeda approach, because the four men who are dead, who we believe are the bombers, are in the category of foot soldiers," Blair said.