UFO enthusiasts called it the "Welsh Roswell" and insisted that one evening in 1974 an alien craft crashed in north Wales and the government secretly removed dead extraterrestrial bodies, the latest files from the National Archives reveal today.

The documents describe how residents of Llandrillo in Merionethshire, near the Berwyn mountains, first reported strange lights streaking across the sky. Then as the night wore on the villagers heard a colossal explosion and felt a tremor ripple through their homes.

Later ufologists claimed roads were sealed off and people kept away from the site after the incident on 23 January 1974. Alien bodies were then taken to Porton Down biological warfare centre for analysis, it was claimed, prompting the comparisons with Roswell, the 1947 incident in which, conspiracy theorists claimed, the US military recovered an alien spacecraft in New Mexico – the story that gave birth to 60 years of ufology, movies and all.

The latest batch of UFO files show how experts at the Ministry of Defence (MoD) initially struggled to explain the Llandrillo incident. A search and rescue team from RAF Valley, on Anglesey, was scrambled in response to the reports of an explosion and a large fire on the mountainside. Some witnesses described seeing a "bright red light, like a coal-fire red. Large perfect circle. Like a big bonfire. Could see lights above and to the right and white lights moving to bottom."

Although the police and the RAF team began their search within an hour of the incident nothing was found. The search carried on through the night until it was called off just after 2pm the next day. The MoD file released today shows the authorities did receive "a number of reports of an unusual object seen in the sky just before 10pm on the evening in question". The officials conceded that a bright light apparently descending to the earth's surface was seen in many parts of Britain.

The military thought that it was most likely a bolide – a meteor which enters the Earth's atmosphere and burns up. The Whitehall file adds that "a private investigation done on behalf of the British Astronomical Society concluded however that the meteor may in fact have disintegrated over Manchester, and that its appearance was preceded at 8.32pm by an earth tremor in the Berwyn mountains with which it had no connection".

But this official explanation failed to convince many subsequent correspondents to Whitehall's now disbanded "UFO unit". As one witness wrote: "That 'something' came down in the Berwyn mountains on that night I am certain … we were visited by an object that evening."

Officially Whitehall has always been "open-minded" on the existence or otherwise of alien life, merely saying that no evidence for it has ever been established. Alien abduction is officially described as "a non-issue". However, the 5,000 pages of files released today document the constant belief of ufologists that officials have the evidence but have covered it up. Among the hundreds of reports of sightings, crashes and other close encounters, the files reveal:

• The inside story of 14 minutes of "missing" film of a Blue Streak missile test in 1964, believed by some to show a "spaceman". The MoD say it was "internal camera reflection".

• A letter claiming Churchill ordered a cover-up of a wartime encounter between a UFO and a RAF bomber over the English coast. A 1999 MoD investigation found no written record of the incident.

• Ufologists' belief that RAF Rudloe Manor, Wiltshire, was Britain's Area 51 – the American military base in Nevada where they claim wreckage from the Roswell UFO was taken. While Rudloe Manor collated UFO reports until 1992 no research was ever carried out there. The files reveal several attempted break-ins by UFO enthusiasts to prove otherwise.

• The punter who had a 100-1 bet with Ladbrokes that "aliens would be found on Earth dead or alive before the end of the century" made a last-ditch appeal to the minister for sport for evidence to support his claim after Ladbrokes refused to pay out. He said the existence of 19 books in Leeds public library on the Roswell incident should have been evidence enough. The MoD said it couldn't help him.