Police are hunting for a possible bomb-maker after the 22-year-old attacker, British-born Salman Abedi, detonated a sophisticated device at a concert venue packed with children on Monday night, killing 22 people and injuring 64.
As the situation remained tense in Manchester, police said they were responding to a call at a college in the Trafford area, roads were closed and they were assessing the situation. Army bomb disposal experts had arrived at the college.
The decision to stop sharing police information with US agencies was an extraordinary step as Britain sees the United States as its closest ally on security and intelligence.
"This is until such time as we have assurances that no further unauthorised disclosures will occur," said the counter-terrorism source, who spoke on condition of anonymity.
The official threat level was raised after the Manchester attack to "critical", its highest level, meaning a further attack could be imminent. Troops have been deployed to free up police officers for patrols and investigations.
After a series of police raids in and around Manchester, a total of eight people are in custody in connection with the suicide bombing. British media have reported that one of them is Abedi's brother but police have not confirmed that.
Manchester's police chief said on Wednesday Abedi was part of a network, and media have reported that authorities suspect he received help constructing the bomb and planning the attack.
Police chiefs have made clear they are furious about the publication of confidential material in U.S. media, including bomb site photographs in the New York Times, saying such leaks undermined relationships with trusted security allies.
"This damage is even greater when it involves unauthorised disclosure of potential evidence in the middle of a major counter-terrorism investigation," a National Counter Terrorism Policing spokesman said in a statement.
British Prime Minister Theresa May will raise the issue with US President Donald Trump when she meets him at a NATO summit in Brussels later on Thursday, a government source told Reuters.
"Bomb-making workshop"
The pictures published by the New York Times included remains of the bomb and of the rucksack carried by the suicide bomber, and showed blood stains amid the wreckage.
"I think it's pretty disgusting," said Scott Lightfoot, a Manchester resident, speaking outside a train station in the city. He criticised media for publishing such material.
"Who's leaking it? Where's it coming from? This is British intelligence at the end of the day, people shouldn't be finding out about this."
The BBC said Manchester police hoped to resume normal intelligence relationships soon but were furious about the leaks.
The bombing, which took place at the Manchester Arena indoor venue just after the end of a concert by US pop singer Ariana Grande, was the deadliest in Britain since July 2005, when 52 people were killed in attacks on London's transport network.
The Manchester attack has caused revulsion across the world because it targeted children and teenagers, who make up the bulk of Grande's fan base. The victims ranged from an eight-year-old schoolgirl to parents who had come to pick up their children.
US channel ABC News reported that police had found a kind of bomb-making workshop in Abedi's home and he had apparently stockpiled enough chemicals to make additional bombs.
Britain routinely shares intelligence with the United States bilaterally, and also as part of the "Five Eyes" network which also includes Australia, Canada and New Zealand.
After Trump defended his decision to discuss intelligence with the Russians during a White House meeting, May said last week that Britain would continue to share intelligence with the United States.