Thirty people were treated in hospital after the bomb detonated in a packed train carriage on Friday morning, in what was Britain's fifth terror attack in six months.
The improvised explosive device failed to detonate fully, according to media reports, but the blast inflicted flash burns on passengers while others fled in panic.
Police in the southern port area of Dover said an 18-year-old man had been detained and he is due to be transferred to custody in London.
"This arrest will lead to more activity from our officers," they said in a statement, outlining that the teenager was being held under anti-terror legislation.
Friday's incident - claimed by the Islamic State group led to the national threat level being raised to critical - meaning another attack could be imminent.
Prime Minister Theresa May announced late Friday that troops -- 1,000 were deployed -- would take on responsibility for guarding key sites, including nuclear facilities, to free up police.
In a statement, anti-terrorism chief Mark Rowley said officers were "chasing down suspects".
"Somebody has planted this improvised explosive device on the Tube. We have to be open-minded at this stage about him and potential associates," he said.
The critical alert terror warning was last used after the deadly suicide attack at Manchester Arena, also claimed by IS, in May.
Witnesses described chaos after Friday's explosion.
Charlie Craven told AFP he heard a "massive bang" and "an orange sort of fireball encompassing the whole Tube coming towards you."
Another, Lauren Hubbard, described it as "a wall of fire".
Twitter user @Rrigs posted pictures of a white bucket smouldering on the train and described how a "fireball flew down carriage and we just jumped out open door".
The bucket, which was inside a frozen food bag, looked like the type used by builders and there appeared to be cables coming from it.
A forensic officer outside Parsons Green station. Thirty people were treated in hospital after the bomb detonated in a packed train, Source: AAP
'Heavy covert components'
The remnants of the bomb were examined by forensic scientists but no further details were released.
British media reported that it had a timer that it had failed to properly detonate.
Police said that they would not release any more details on the man arrested at this stage because of "strong investigative reasons".
Police officers are being deployed on the transport network and on the street across Britain.
Victims were treated in hospital although health authorities said none were in a serious life-threatening condition.
Only three remained in care on Saturday morning.
Louis Hather, 21, had been travelling to work and was three carriages down from where the explosion took place.
"I could smell the burning. Like when you burn plastic," he told AFP.
He was trampled on as passengers stampeded out of the station and his leg was badly cut and bruised.
The area around Parsons Green station - a quiet and wealthy residential district, filled with chic cafes - was evacuated for most of the day.
Four previous attacks in London and Manchester this year claimed the lives of 35 people.
Three of those attacks involved a vehicle ploughing into pedestrians.
