Five security guards were among seven people killed during the raid in Peshawar and there were several explosions in the area which caused nearby buildings to collapse.
Six militants in two Toyota Corolla cars, laden with explosives, managed to pierce the city's most heavily-guarded complex, which houses the provincial intelligence headquarters, the American consulate and the homes of several local ministers.
The audacity of the attack caused panic in the city, which quickly emptied of traffic, and alarm among security officials that the Taliban managed to penetrate Peshawar's most-heavily fortified and militarised area.
The militants defied a ban on traffic on the Consulate's Hospital Road, within the Army's cantonment area, which forces all cars to approach from the East. Instead they drove in from the West where they opened fire on police and paramilitary troops outside the consulate and fired rocket-propelled grenades which blew up an Armoured Personnel Carrier.
One eyewitness, Hamidullah Jan, said the attackers had successfully penetrated the consulate compound. He said he heard an exchange of gunfire followed by two loud explosions.
Hasan Ali, 25, who was being treated for abdominal injuries from the blast, said he saw the first explosion and was running to safety when a second and third explosion "shook the entire area".
Senior North West Frontier Province minister Bashir Ahmad Bilour, whose home is 200 yards from the scene of the raid, said he saw six dead bodies, four of whom he said were the remains of terrorists and that suicide vests were close by them.
A Taliban spokesman later claimed responsibility for the attack, which he said targeted the United States consulate in revenge for American drone attacks which have killed a number of senior militant leaders, including the leader of the Pakistani Taliban, Hakimullah Mehsud and his predecessor Baitullah Mehsud. Drone attacks have intensified since President Barack Obama took office last year.
"We accept the attacks on the American consulate. This is revenge for drone attacks. We will carry out more such attacks. We will target any place where there are Americans," said Azam Tariq, Pakistani Taliban spokesman.
Pakistani and American officials condemned the attacks and said they would not deflect them from the war on Taliban and al-Qaeda militants.
"The co-ordinated attack involved a vehicle suicide bomb and terrorists attempting to enter the building using grenades and weapons fire," American officials said in a statement from their embassy in Islamabad.
Pakistan's prime minister Yousuf Raza Gilani said: "The miscreants are trying to spread panic among people in a desperate attempt to undermine the governmen's operation against terrorists."
The assault came hours after at least 43 people were killed in a separate attack by militants on a political rally.
Supporters of the Awami National Party, which is power in the North West Frontier Province died at the celebration in Lower Dir. Security officials said they had been targeted because of their strong support for the Pakistan Army's anti-Taliban offensives in South Waziristan, Orakzai and North Wazaristan, where the al-Qaeda leadership is believed to be in hiding.
More than 3,200 people have been killed in terrorist attacks in Pakistan in the last three years but in the last six months, Peshawar has borne the brunt. More than 117 were killed in the bombing of its Mina Bazar last October, while 46 were killed in the city in three more attacks in November alone.
Telegraph.co.uk
