Marksmen are searching empty buildings, woods and fields in and around a town in north-east England in the hunt for suspected gunman Raoul Moat.
People had been told to stay indoors amid fears that the former bouncer fled on foot after abandoning his car in Rothbury, Northumberland.
A cordon around the town has been relaxed but armed police have been continuing to search through the night.
Moat, 37, is wanted over the shooting of three people over the weekend.
Northumbria Police has revealed two men taken hostage by him have been found and arrested for conspiracy to murder.
A third man was also arrested earlier in the Wrekenton area of Gateshead in connection with the investigation.
An exclusion zone was in force in Rothbury for much of Tuesday, with dozens of armed officers drafted in from neighbouring forces and police searching all vehicles leaving the town.
At one point armed officers stormed a disused farm building but did not find Moat.
A school in nearby Longhorsley was turned into a temporary rest centre for stranded residents.
In an appeal to residents to report anything suspicious in the town, Temporary/Deputy Chief Constable Jim Campbell said: "We are committed to doing all we can to find this man, which means the intensive and systematic searches are continuing throughout the night.
"Armed officers remain in the town and will work on.
"We want to reassure residents in the Rothbury area that despite this activity it is still very much 'business as usual' for local residents.
"Schools in Rothbury will be fully open on Wednesday and police resources will be in place to reassure parents that they can safely take their children to and from school."
He said a "stringent two-mile exclusion zone" around the town had been downgraded but warned officers would still be patrolling the area and vehicles entering and leaving the town would be checked.
"We will continue to keep a large and highly visible police presence in the town of Rothbury for as long as necessary while the search continues," he said.
A former girlfriend said she could be the reason Moat chose to hide in Rothbury.
Yvette Foreman, 35, dated him when they were both in their early 20s and the pair spent weekends camping in the woods around her home in the town.
She said Moat could survive undetected in the countryside surrounding the town for days.
The police operation began when Moat's ex-girlfriend Samantha Stobbart, 22, was shot and her boyfriend Chris Brown, 29, was killed in Birtley, Gateshead, on Saturday.
Pc David Rathband, 42, was also shot in his patrol car in Newcastle on Sunday.
The father-of-two suffered wounds to his face and upper body and is critical but stable after undergoing surgery.
A police spokesman described him as "in remarkable spirits given what he has gone through".
Miss Stobbart's condition is said to be "improving".
Moat had just been released from Durham Prison after an 18-week sentence for assault.
Officers had been warned that he may have been planning to harm his former girlfriend and Northumbria police said they had referred the case to the Independent Police Complaints Commission.
At a press conference it was revealed that on Monday night police had asked the media for a blackout on news that Moat was believed to have kidnapped two men after the shootings on Saturday.
Det Ch Supt Neil Adamson said: "I can now inform the public that throughout this operation and investigation we have been dealing with a complex, fast moving and challenging hostage situation.
"At an early stage it was believed that Moat may have taken two hostages around the time of the shootings in Birtley.
"We have been dealing with this matter in accordance with the national guidelines in relation to kidnap.
"Throughout this time there has been a significant risk to the lives of the two men."
He confirmed that the two men found in Rothbury had been arrested.
A 49-page handwritten letter apparently from Moat to police "declared war" on them.
In the document, which was also handed to The Sun newspaper, Moat said: "Last night I called 999 and declared war on Northumbria Police before shooting an officer on the West End A69 roundabout in his T5.
"Rang again and told them they're gonna pay for what they've done to me and Sam.
"I went straight but they couldn't let it go.
"The public need not fear me but the police should as I won't stop till I'm dead."
Police confirmed that he had only one previous conviction for common assault and had been arrested on 12 separate occasions, which resulted in him being charged with seven separate offences.
Isabelle Wilson, from Rothbury, found the car believed to have been used by Moat.
"We saw the car last night when we were walking our dogs," she said.
"We noticed the registration number and when I heard the news this morning I said to my husband I was sure that was the car. He went back to check then we called the police."
Moat is described as 6ft 3in (1.9m) tall and of muscular build. Family members said that he used body-building steroids.
These have been linked to aggressive behaviour. His family have also said he was prone to "eruptions of anger".