ISIS claims UK concert attack that killed 22
The terrorist group claimed responsibility for the attack in a statement published on its social media channels.
Prime Minister Theresa May said the police knew the identity of the bomber, who died in the blast late Monday, saying he intended to cause "maximum carnage".
She said he is believed to have acted alone, but police arrested a 23-year-old man on Tuesday morning in connection with the attack, which occurred just over two weeks before Britain holds a general election.
"One of the caliphate's soldiers placed bombs among the crowds," the IS group said in a statement published on its social media channels, and threatened more attacks.
Screaming fans, many of them teenagers, fled the venue in panic after the explosion at the end of the concert by US star Ariana Grande in the 21,000-capacity Manchester Arena, in northwestern England.
"A single terrorist detonated his improvised explosive device near one of the exits of the venue, deliberately choosing the time and place to cause maximum carnage and to kill and injure indiscriminately," May said after an emergency ministerial meeting.
Eight-year-old Saffie Rose Roussos and a teenager, Georgina Callander, were among the first of the 22 victims to be confirmed.
Another 59 people were wounded, many with life-threatening conditions.
"We know that among those killed and injured were many children and young people," the prime minister added.
Police said the blast occurred in the foyer of the indoor arena, a covered area which links the auditorium to Victoria Station, a train and tram hub.
Witnesses reported seeing bodies on the floor after the blast around 10:30pm (2130 GMT) on Monday, and some fans were trampled as panicked crowds tried to flee the venue.
"There were fathers carrying their little girls in tears. People were pushing down the stairs. It was just... chaos," Sebastian Diaz, a 19-year-old from Newcastle, told AFP.
Families were separated, with dozens of young people taken to nearby hotels overnight, and some parents were still desperately searching for their children on Tuesday.
"I'm just hearing nothing -- her phone's dead," Charlotte Campbell, whose 15-year-old daughter Olivia was at the concert, told BBC radio.
The attack was the deadliest in Britain since July 7, 2005 when four suicide bombers inspired by Al-Qaeda attacked London's transport system during rush hour, killing 52 people and wounding 700 more.
It revived memories of the November 2015 attack at the Bataclan concert hall in Paris in which armed men wearing explosive belts stormed in and killed 90 people. That attack was also claimed by IS.
Grande, who is popular with teens and pre-teens, expressed her anguish following the Manchester attack.
"Broken. From the bottom of my heart, I am so, so sorry. I don't have words," the 23-year-old wrote on Twitter.
May said it was "a callous terrorist attack", conducted with "appalling, sickening cowardice" and Queen Elizabeth condemned it as an "act of barbarity".
Britain's national terror threat level has been "severe", meaning an attack is highly likely, since August 2014, and May said this would remain unchanged, but under review.
In an unusual response, the head of the MI5 domestic Intelligence agency, Andrew Parker, said his teams had been working through the night.
"We remain relentlessly focused, in numerous current operations, on doing all we can to combat the scourge of terrorism and keep the country safe," he said.
Campaigning for the June 8 general election, which May called last month to strengthen her hand in forthcoming Brexit negotiations with the European Union, has been suspended.
US President Donald Trump led condolences from political leaders across the globe, as well as stars from the world of music and football such as former Manchester United player David Beckham.
"So many young, beautiful, innocent people living and enjoying their lives murdered by evil losers," Trump said during a visit to Bethlehem.
US singer Taylor Swift, a friend of Grande, wrote: "My thoughts, prayers and tears for all those affected by the Manchester tragedy tonight."
"A lot of these people at the concert were small children and teenagers like my daughter," witness Stephanie Hill told AFP.
"These were Christmas presents for the majority of people. What should have been a happy occasion has ended like this, it is just tragic."
In a city famed globally for its musical traditions and football teams, showbusiness stars and teams joined in to express their shock at the carnage.
"We are deeply shocked by last night's terrible events at the Manchester Arena," said Manchester United, whose manager Jose Mourinho said the victims were in the club's "minds and hearts."
A support centre for people caught up in the attack was set up at Etihad Stadium, the home of Manchester City, which is next door to the venue.
City captain Vincent Kompany offered his condolences on Twitter, saying: "It's a sad day for the great city of Manchester. #Unity".
May headed to Manchester to meet police and emergency services.
She hailed the city's response to the attack, which saw residents opened their doors to stranded concert-goers after trains were cancelled.
Britain's third biggest city was hit in 1996 by a massive car bomb planted at a shopping centre by the Irish Republican Army (IRA) which wounded more than 200 people.
JOIN OUR PULSE COMMUNITY!
Eyewitness? Submit your stories now via social or: