Police are scouring Mumbai for four Pakistani alleged militants believed to have entered the city to carry out an attack, a top police official said.
There was credible information that at least four members of the Lashkar-e-Taiba (LeT) militant group were in the city, said the police commissioner.
Police have released a sketch of one of the suspects, set up checkpoints and placed extra officers on patrol.
India blames LeT for the 2008 attacks in Mumbai which killed 166 people.
Roads were closed on Friday in and around the luxury Taj Mahal Palace hotel - the focus of the deadly siege two years ago - and armed police were patrolling at high-profile sites, including consulates.
Joint police commissioner Himanshu Roy told a news conference on Thursday evening: "The four men are planning violent attacks that are going to cause destruction."
"The four have recently arrived in Mumbai. We believe the threat is serious," he added.
Indian police issued a similar warning in September about a possible attack by two Islamist militants in the city, which is India's financial capital, but nothing happened and no arrests were made.