Scotland Yard Commissioner Sir Ian Blair yesterday admitted more people could be shot after officers shot an innocent man in their hunt for would-be suicide bombers.
He apologised to the family of Brazilian electrician Jean Charles de Menezes, aged 27, but said there would be no change to the police shoot-tokill policy.
Mr de Menezes was executed by undercover armed detectives who shot him in the head at point blank range on Friday as he tried to board a tube train at Stockwell.
His furious family branded the police "stupid and incompetent" and the Brazilian government said the British had made a "lamentable mistake".
Last night police arrested a third man in connection with the attempted bombings in London, who was held under the Terrorism Act in Tulse Hill, London.
Mr de Menezes had left a small block of flats in Tulse Hill, London, where he lived with two of his cousins Vivian and Patricia.
The building was under surveillance because of a suspected link to the attempted bomb attacks on three tube trains and a number 26 bus on July 21.
He caught a bus to Stockwell tube where he was challenged by officers but, according to witnesses, he bolted down an escalator.
His bulky clothing added to suspicions he might be a suicide bomber and police followed him on to a train and shot him dead.
Alex Pereira, aged 28, a cousin of Mr de Menezes, said: "He was a 100 per cent good guy who never did anything wrong and had no reason to run. I don't think he ran from police.
"I don't think he would do that. What the police have shown is that they are incapable and stupid."
He said Mr de Menezes, known as "Jim" to his English friends, had been working legally in Britain for three years and was believed to have been on his way to repair an alarm in Wilsden Green when he was shot.
He was from Sao Paolo and his family, including his elder brother and his two retired parents, still live in Brazil.
Sir Ian apologised to the family but defended the actions of his officers. "This is a tragedy. The Metropolitan Police accepts full responsibility for this. To the family I can only express my deep regrets," he said.
"What we have got to recognise is that people are taking incredibly difficult fast time decisions in life threatening situations.
"It wasn't just a random event and what's most important to recognise is that it's still happening out there.
"There are still officers out there having to make those calls as we speak."
He said the "shoot-to-kill in order to protect" policy for dealing with suspected suicide bombers would continue.
"There is no point in shooting at someone's chest because that is where the bomb is likely to be.
"There is no point in shooting anywhere else if they fall down and detonate it. The only way to deal with this is to shoot to the head.
"I think we are quite comfortable the policy is right but these are fantastically difficult times.
"The important thing here is there is nothing gratuitous going on, there is nothing cavalier here, there is no conspiracy to shoot people."
Former foreign secretary Robin Cook said the death of Mr de Menezes had been a "serious blow" to relations with Brazil and police would have to look again at the "shoot-to-kill" policy.
Yesterday police carried out controlled explosions on a suspicious package found in Little Wormwood Scrubs which has been linked to the devices found on three tube trains and a bus on July 21.
The package has been taken away for further examination. Two men arrested in Stockwell in connection with the July 21 attempted attacks were last night still being held at Paddington Green police station.