Saddam Hussein was in US custody last night after being captured near his home town of Tikrit without a shot being fired.

The man who ruled his terrified people from a string of glittering palaces was finally cornered cowering in a hole in the ground next to his mud hut hideout.

With the toppled dictator were two AK-47 rifles, a pistol and $750,000. An orange and white taxi was parked nearby.

Saddam was not injured in the raid and was in good health, although "bewildered" and "disorientated", said the US military. He put up no resistance.

Two Iraqis who tried to flee the scene were also arrested by some of the 600 US troops involved in Operation Red Dawn.

Its dramatic success, was hailed by US President George Bush last night.

Speaking in the White House Cabinet room, he said: "Now the former dictator of Iraq will face the justice he denied to millions.

"The capture of this man was crucial to the rise of a free Iraq. It marks the end of the road for him and all who bullied and killed in his name."

For the Iraqi people, said Mr Bush "the torture chamber and the secret police are gone forever".

He went on: "You will never have to fear the rule of Saddam Hussein ever again.

"In the history of Iraq a dark and painful era is over. A hopeful day has arrived."

But in a message to the US people, Mr Bush warned the capture of Saddam did not mean violence in Iraq would end, or that the war against terror was over.

"We still face terrorists who would rather go on killing innocents than accept the rise of liberty in the Middle East," he said.

But he promised: "The United States of America will not relent until this war is over."

Security experts said last night that attacks by terror groups not linked to the toppled dictator were expected to continue for at least six months.

In the latest attack, a suspected suicide bomber detonated explosives in a car outside a police station west of Baghdad yesterday, killing at least 17 people.

The first formal confirmation of the capture of Saddam was given by Paul Bremer, head of the Coalition Provisional Authority in Iraq, who told a news conference in Baghdad: "Ladies and gentlemen - we got him!"

Lt General Ricardo Sanchez, head of the US military in Iraq, then revealed Saddam had surrendered without a fight and that there had been no injuries.

The Iraqi Governing Council, to whom the coalition will hand over power next year, said Saddam would be tried in a special court with a panel of five judges and international legal observers.

But Lt Gen Sanchez said Saddam's fate had yet to be determined.

Saddam was found in a "spider hole"about 8ft underground, close to the adobe mud hut where he had been staying. In the hut, socks and T-shirts still in their wrappers lay around.

Video footage of Saddam's medical examination by the US military was broadcast, showing the 66-year-old with a dishevelled beard and unkempt hair. DNA tests confirmed his identity.

Members of the Iraqi council were taken to see Saddam at a secret location and also confirmed his identity. They said he appeared defiant and unapologetic.

Prime Minister Tony Blair was the first coalition leader to react to the news.

He said: "Saddam is gone from power. He will not be coming back. That the Iraqi people now know and it is they who will decide his future."

He added:"The shadow of Saddam has finally lifted from the Iraqi people.

"We give thanks for that but let this be more than a case simply for rejoicing.

"Let it be a moment to reach out and reconcile."

Saddam's capture was welcomed even by leaders who had opposed the coalition action which ended his regime.

French President Jacques Chirac said he was "delighted" and Germany's Chancellor Gerhard Schroeder said he heard the news "with great joy".

Interrogation of Saddam will now continue at an undisclosed location, with Mr Bush and Mr Blair hoping he will reveal details of his weapons programmes, or that former henchmen will now feel free to talk.

News of Saddam's capture sent crowds on to Baghdad streets, firing off bursts of celebratory gunfire.

The scenes were repeated across much of the country as his former subjects began to finally believe that Saddam's brutal reign was over.

In Baquba, the Muslim priest issuing the daily call to prayer, instead issued a call to celebrate.

And even Iraqi journalists covering the Press conference which broke the news to the world cheered, punched the air and shouted "Death to Saddam".

Iraqi foreign minister Hoshiyar Zebari said: "This nightmare is gone once and for all and celebrations are taking place throughout the country from the north to the south. It is a great day."

However, in Saddam's stronghold of Fallujah and Hawja, there were reports of incredulity and quiet streets.

Some Tikrit residents said they believed the arrest was the result of betrayal.

"Today is the day that Iraq was defeated, not in April," said barber Hamid.

The mother of a North Yorkshire military policeman killed in Iraq said she was delighted at the news.

Sandra Hyde, of Northallerton, the mother of 23-year-old Ben Hyde, said: "With the exception of having Ben home for Christmas, this is the best thing we could have asked for.

"Hopefully, this is now the beginning of the end and everything will start to come together - they'll find the weapons and it will be over and laid to rest and the people can start looking to the future."