American law agencies had wanted to take Haroon Rashid Aswat into custody for his supposed part in a plan to set up a military training camp at an Oregon ranch. However, that has been resisted so far by Britain. Under an agreement drawn up by British and American officials Mr Aswat, 30, will be put on a plane to the United Kingdom while the US prepares extradition papers.
But senior police sources said last night that Mr Aswat is not wanted for any crimes in this country and the only reason for holding him would be due to a US request while extradition proceedings are underway.
Senior British officials say the Americans have so far failed to present an extradition request. It is also believed that the British government has refused US suggestions that Mr Aswat be subjected to the process of "rendition" - incarcerated in a third country.
Levy Mwanawasa, the president of Zambia, said: "I would like to confirm that we have arrested Mr Aswat, who has been held on violating the immigration laws of Zambia. Once we were holding him, we realised he was an alleged terrorist. It was agreed between the American and British governments that he should be deported to the UK."
Mr Aswat grew up in Dewsbury, West Yorkshire, the same area as 7 July suicide bomber Mohammad Sidique Khan. British security agencies said they had "some interest" in questioning Mr Aswat about whether he had any knowledge of the London bombings but dismissed claims that he was the "mastermind" of the bombings.
The US case against Mr Aswat is based on evidence given by James Ujaama, an alleged accomplice after a plea bargain which reduced his sentence of 25 years to two years in prison.
According to FBI documents, Mr Aswat flew into New York on 26 November 1999 on an Air India flight with Oussama Abdullah Kassir, a Swedish national who claimed to be Osama bin Laden's bodyguard. Ujaama claims to have driven the pair to the Oregon ranch but the mission was abandoned after Aswat and Kassir had complained about lack of facilities.