Meanwhile, the New York Times reported that a federal official said the incident was not considered a terrorist threat and that the New York police department had told the department of homeland security to stand down.

The busy square in the heart of Manhattan was evacuated after the dark-coloured 4-wheel-drive vehicle was found to be smoking and a small flash was observed by firefighters.

Popping sounds were reportedly also coming from the car.

'Failed device'

Police and fire department sources said the device was being treated as a "failed device" and included explosives, burned wires, three tanks of propane and two canisters of gasoline.

Al Jazeera's Kristen Saloomey, reporting from Manhattan, said that while the square was shut down, life was going on as usual in areas nearby.

"New Yorkers have lived through many scares," she said.

"The SUV was a Nissan Pathfinder with licence plates from the state of Connecticut. The plates were actually traced and found to belong to another vehicle so obviously investigation is still going on."

A statement issued by the White House said the New York police department had done "excellent work" in responding to the incident.

Unconfirmed reports said someone had been seen running from the car.

The vehicle had been parked close to a theatre on the corner of 45th Street and Seventh Avenue showing a production of The Lion King.

Firefighters in bomb suits were seen at the area and a robotic device was being used to investigate the suspicious vehicle.

Police said they were evacuating several blocks around the scene in case there were other devices.

Times Square is one of the city's most high-profile attractions and police are deployed there in large numbers.

In December they closed the area while inspecting a van at first feared to contain a bomb, but which turned out to be carrying nothing dangerous.