One man on a grassy knoll takes a pot-shot at the HQ of MI6. It's as simple, and as terrifying, as that

The Royal Vauxhall Tavern in south London presents a cabaret by Regina Fong on Thursday evenings and Benjamin's karaoke on Tuesdays. But on Wednesday night it was shut and padlocked when a car pulled up outside. Two men got out. A third remained on the driver's seat.

The Royal Vauxhall Tavern in south London presents a cabaret by Regina Fong on Thursday evenings and Benjamin's karaoke on Tuesdays. But on Wednesday night it was shut and padlocked when a car pulled up outside. Two men got out. A third remained on the driver's seat.

One of the men who had stepped out of the car hung around outside the gate, keeping a close eye along Kennington Lane. His companion, clutching something under his jacket, strolled through the open gates of Spring Gardens, a park behind the pub and quickly clambered up a six foot grassy knoll. He produced a rocket propelled grenade launcher, aimed at the top of a building 300 metres away, visible over a railway bridge, and squeezed the trigger. As the grenade hit a set of windows on the eighth floor with its customary whoosh and bang, the men scrambled back into the car and drove off. The time was 9.45 pm.

That, the police believe, was how the terrorists carried out their attack on the headquarters of Britain's Secret Intelligence Service, MI6, and secured a major propaganda triumph. Although the police said officially that a number of groups may have been responsible for the attack, suspicion had focussed on the Real IRA, the dissident Republican group responsible for the 1998 Omagh bomb that killed 29 people.

The damage to the MI6 building was minor thanks to the reinforced, blast-proof windows. Two panels and a section of the metal frame bore the brunt of the explosion. But By striking at such a high profile and symbolic target in the heart of London, the dissident Republicans had sought to prove that they too could carry out "spectaculars" like their former comrades in the Provisional IRA, who launched a mortar attack on 10 Downing Street while John Major was holding a cabinet meeting in 1991.

The weapon used, security sources believe, was an RPG 7, designed to penetrate steel, which had been used extensively against the armoured Land Rovers of the Royal Ulster Constabulary in Northern Ireland.

The RPG weighs 7.5kg, can be easily folded under a jacket, and is cheap; thousands were sold by former Warsaw Pact armies and a large consignment is known to be in the hands of dissident Republicans. Their appearance on the mainland for the first time sent a thrill of apprehension through the security forces.

Within minutes of the blast, Scotland Yard's anti-terrorist routine had swung into action. Dozens of vehicles sealed off the area on the south side of Vauxhall Bridge. Helicopters with searchlights patrolled overhead and armed officers searched through surrounding buildings. But the attackers had disappeared.

Deputy Assistant Commissioner Alan Fry, the head of the Yard's anti-terrorist branch, appeared in front of the media just after 3.15am yesterday looking tired and strained.The police had warned of possible attacks and that terrorists were back on the mainland, he said. "We have a genuine threat of terrorism in London and that is against a number of targets. This was an audacious attack in the busy heart of London and we are going to hunt down whoever was responsible."

Senior government figures were kept abreast of developments. The Prime Minister, who was at Chequers, said he was "relieved there was no loss of life". The Foreign Secretary Robin Cook, who has responsibility for for MI6, said "I have spoken to the chief of MI6, Richard Dearlove. He has confirmed there was no damage inside the building. I asked him to commend SIS staff for maintaining business as usual".

The MI6 HQ, with its hi-tec styling, cost £ 240m to build. The service moved there from Century House in 1994 as part of a move away from its cloak-and-dagger image to one of supposed transparency. It's location was no great secret.

Standing outside the building - underneath a mauve sign saying "The Pod Landing Zones" which was to do with the "Vauxhall Circus Traffic Problem" - a detective explained how the terrorists had mounted the operation. The angle of trajectory led them to Spring Gardens and the knoll from where they believed the RPG was fired. An office block backs on to the park with security cameras on the walls. The police will be studying whether anything had been caught on film.

"They (the terrorists) didn't give a warning presumably because they were hitting a building late in the evening and there was less chance of human casualties," the detective said. "But these are fire-and-forget weapons and they can easily miss their target. Sooner or later, we are going to get casualties among people like these," he said, waving at a gathered crowd.

Among them were people who had heard the sound of the missile strike, many of them said they had heard two separate bangs and most of them knew immediately it was some kind of a bomb. Sridharan Balakrishnan, 23, who works at a nearby Texaco garage, said: "I had gone to buy some burgers near the MI6 place when I heard explosions. There were two of them within two seconds of each other, they were very loud and they hurt my ears. Then I saw what looked like fire coming out."

Tom Whitter, who was nearby, said: "The first noise sounded like a detonation, but the second did not sound like a full explosion".

Andrew Preece was driving home with his girlfriend when he saw a flash of light from the top of the MI6 building. "It was from the top of the building. It was followed by a large bang and the ground seemed to shake. I looked at my girlfriend and said 'That was a bomb'"

William Davis, 35, an actor, was at his fifth-floor flat in Victoria Mansions, South Lambeth Road. "First it sounded like rockets. I thought it was kids playing with fireworks. Then I heard a big explosion. There was smoke rising from the building and an acrid smell wafted over my flat."

Police and security forces were gearing up for what is feared to be the first concerted terrorist campaign in the mainland since the Provisional IRA declared their last ceasefire. There will be a major upgrading of security and urgent evaluation of intelligence with the RUC. One detective said: "We shall get these people. But for the time being, the public has got to remember that the bombers are back."