British Islamic extremists have been involved in weapons training with assault rifles at a mosque in London, intelligence sources have told The Observer.

The disclosures that hardline Islamists practised with Kalashnikov AK-47s at the Finsbury Park mosque in north London underline the pivotal role that Britain has played in the recruitment of volunteers to fight alongside Osama bin Laden's al-Qaeda group all over the world.

It will also intensify pressure on the Government to crack down on Islamic militants using the UK as a base.

MI5 recruited worshippers at Finsbury Park who opposed the hardline stance taken by controversial Muslim cleric Abu Hamza, who often leads prayers there, and asked them to help monitor the activities of extremists. Early last year the agents told their handlers that several groups had been taught to strip and reassemble Kalashnikovs in the mosque's basement. It was not clear if the guns were live or deactivated weapons, which can legally be owned in the UK.

Hamza, the most influential and radical of the prayer leaders at the mosque, said yesterday that, as far as he knew, no 'harmful' activities had ever taken place there. However, he admitted that he could not monitor all areas of the mosque.

Hamza, who is wanted for alleged terrorist offences in the Yemen, told The Observer that the mosque may have been the victim of a smear campaign by foreign agents. He named Algeria and Egypt as two countries particularly keen to see the mosque shut down. 'They are sending agents to cause us trouble,' he said.

Last month The Observer revealed that a video showing the execution of Algerian conscripts by hardline militants had been circulated at the mosque. Hamza denied it had been used for recruiting purposes.

However, MI5 has been told by their agents that scores of young men were being sent from the mosque for training at camps in Afghanistan. They reported that consignments of supplies including radio and telecommunications equipment were dispatched to Pakistan for eventual distribution in the Afghan training camps allied to or run by al-Qaeda. They also revealed a complex operation run by some men attending the mosque to provide volunteers with false documents. Although the men recruited by MI5 were not directly involved in the logistics of supplying overseas Mujahideen, the operation was openly talked about at the mosque.

Several men involved with the al-Qaeda group have already been linked to Finsbury Park mosque. Feroz Abbassi, a computer engineer from Croydon held by the US in Cuba, was 'indoctrinated' in the mosque, according to his parents. Jerome Courtailler, arrested in Holland for allegedly plotting to blow up the US embassy in Paris, prayed there as did Djamel Beghal, Zacarias Moussaoui and Richard Reid, all of whom have been linked to al-Qaeda by investigators.

Three former MI5 agents interviewed by The Observer said that the mosque's reputation drew radical Islamists from all over Europe. One recalled white Swedish converts to Islam who had sought out the mosque because they want to take part in 'the Jihad'.

'They got false papers from people they met at the mosque and were sent to Afghanistan via Germany,' one former agent recalled.

Senior officers with two Middle Eastern intelligence agencies based in Peshawar, the Pakistani frontier city that was until recently a major base for militant volunteers fighting alongside the Taliban and their al-Qaeda allies, said that interviews with Mujahideen arrested by Pakistani authorities over the last 18 months had revealed that many had received instruction in basic battlefield first aid from a doctor who ran lessons at the mosque. They said that consignments of medical supplies, including large quantities of antibiotics, had been sent from the UK.

Hamza yesterday denied the allegations, saying that the mosque lacked funds.

The British sources said they had told MI5 that volunteers who had fought in Afghanistan for the Taliban or for Islamic militants in Chechnya and Algeria boasted at the mosque of battles they had taken part in. Many younger worshippers were deeply impressed by the 'war stories', the men said.