"Extensive and considerable protections have been or soon will be in place all across the country," Homeland Security Secretary Tom Ridge said at a hastily arranged news conference at department headquarters.
"Your government will stand at the ready 24 hours a day, seven days a week, to stop terrorism during the holiday season and beyond."
Orange means a high risk of terrorist attack. Since May, the level had been at yellow, or an elevated risk, and in the middle of the five-color scale.
Officials tell CBS News they continue to have concerns about possible suicide attacks involving aircraft - including commercial passenger aircraft.
Ridge cited reports that Osama bin-Laden's terrorist network is trying find holes in U.S. aviation security, and that "extremists abroad" are anticipating attacks that will rival or exceed the scope of the terrorist attacks of Sept. 11, 2001.
The government elevated the threat level, last raised in May, after U.S. intelligence agencies "received a substantial increase in the volume of threat-related intelligence reports," Ridge said.
"These credible sources suggest the possibility of attacks against the homeland around the holiday season and beyond," he said. "These strategic indicators, including al Qaeda's continued desire to carry out attacks against our homeland, are perhaps greater now than at any point since Sept. 11."
Ridge said that "recent reporting reiterates that al Qaeda continues to consider using aircraft as a weapon. They are evaluating procedures both here and abroad to find gaps in our security posture that can be exploited."
As a result of the change in threat level, all federal departments and agencies were put in place action plans and stepping up security at airports, border crossing and ports, Ridge said.
He also sought to reassure Americans about the warning, and urged them to use common sense and report anything suspicious, such as packages, and to prepare or review personal emergency plans.
"We have not raised the threat level in this country for six months, but we have raised it before. And as before, Americans can be assured that we know what we must do and we are doing it," Ridge said.
He urged Americans not to disrupt holiday travel plans. "America is a country that will not be bent by terror. America is a country that will not be broken by fear," Ridge said.
He also said officials did not see a connection between the capture of ousted Iraqi leader Saddam Hussein and the heightened security alert.
The threat level last was last raised to orange on May 5. Authorities reported at the time receiving general intelligence that pointed to possible terror attacks in the United States related to bombings in Saudi Arabia and Morocco that killed dozens of people. The threat level was returned to yellow 11 days later.
U.S. officials by the end of last week were telling holiday travelers to be vigilant about the threat of terrorist attacks. The warning was prompted in part by a raised level of ominous intercepted communications that has not quieted for months.
On Friday, the Arabic television network Al-Jazeera aired a new statement from Ayman al-Zawahri, the chief deputy of Osama bin Laden. The CIA said Saturday it believes the tape is authentic.
"We are still chasing the Americans and their allies everywhere, even in their homeland," according to the voice on the tape.
Some statements from al Qaeda leaders are later regarded as preludes to attacks; others simply propaganda.
Gen. Richard Myers, chairman of the Joint Chiefs of Staff, said Sunday morning that officials were trying to determine whether increased terrorist chatter being detected in recent weeks was an aberration or something more serious.
"There is no doubt, from all the intelligence we pick up from al Qaeda, that they want to do away with our way of life," he said in a broadcast interview after his return from a trip to Iraq and Afghanistan.
"And if they could use another catastrophic event, a tragedy like 9-11; if they could do that again, if they could get their hands on weapons of mass destruction and make it 10,000 (deaths), not 3,000, they would do that."
Much of the threat information suggests attacks directed at U.S. interests in Saudi Arabia and Iraq, officials said last week.
"My guess is the government is taking this very seriously both in Saudi Arabia and here," Sen. Richard Lugar, R-Ind., the chairman of the Senate Foreign Relations Committee, said in a broadcast interview shortly before Ridge's announcement.
The State Department last week recommended that its nonessential diplomatic personnel as well as diplomatic families leave the Saudi kingdom.
The May change in alert status was fourth time it had risen to orange. Each change set off a flurry of increased security measures by cities, states and businesses. The lowest two levels, green and blue, and the highest, red, have not been used since the system was put in place in early 2002.