A 17-year-old asylum seeker from Russia was arrested on Sunday in connection with a 'bomb-like device' that has been found and neutralized in the centre of Oslo.

The device was found late on Saturday near a busy underground station in Norway's capital and was defused before it detonated, authorities said.

The youth was detained on suspicion of handling explosives, but investigators do not know if he planned to carry out an attack with the homemade device, Signe Aaling, chief prosecutor for Norway's security service, said.

A 17-year-old asylum-seeker from Russia has been arrested in connection with a 'bomb-like device' that has been found and neutralized in the centre of Oslo

Police Chief Vidar Pedersen confirmed that the device, initially described as 'bomb-like,' was an explosive. The police Twitter account said it had been defused or neutralized.

The police bomb squad said the device was about 1ft (30cm) wide and had appeared capable of causing only a limited amount of damage.

The suspect, who is believed to have lived in Norway since 2010, has denied any guilt according to his lawyer. Security service head Benedicte Bjornland said intelligence agencies were aware of the suspect.

The risk of an attack taking place in Norway has also been raised to 'probable' from 'possible', Bjoernland told a news conference, adding that the new threat level will be in place for two months.

An explosive device was found near a busy subway station in Norway's capital and defused before it detonated, authorities said

Police Chief Vidar Pedersen confirmed that the device, initially described as 'bomb-like,' was an explosive

It remained unclear if the 17-year-old had acted on his own, she said, or whether or not he had intentions of carrying out an attack.

'But it's likely that the attacks during the last year in France, Germany, Britain, Russia and Sweden are having a contagious effect also in Norway, impacting people with extreme Islamist sympathies,' Bjoernland added.

Pedersen said the device was found on the street just outside the Groenland underground station, and police swept through the area to remove people from bars and restaurants.

'Every restaurant was being closed,' said 23-year-old Malin Myrvold, who witnessed the scene from a fourth-story window. 'You could see cops in heavy armor going in every store and restaurant.

Police would not give any details about the suspect, or further information about the device

'We were trying to see what was going on. The police were screaming at us to get back inside and stay where we were,' she added by telephone.

Norway was put on high alert after neighboring Sweden suffered a truck attack in the capital that killed four people and injured 15.

The suspect in Friday's attack, a 39-year-old native of Uzbekistan, has been arrested.

It was unclear whether he was also a Swedish citizen or resident or even how long he'd been in the country.

The Norwegian incident happened less than a mile from the government buildings that were damaged in a deadly bomb attack carried out by right wing extremist Anders Breivik in 2011.

That bomb and a subsequent gun massacre killed a total of 77 people.