Fugitive Raoul Moat is tonight in a stand-off with armed police.
The scene is only a couple of hundred yards upstream from where a Lexus car believed to have been used by Moat was found on Tuesday.
Moat, 37, was surrounded by at least 10 snipers in the riverside area of Rothbury, in Northumberland, amid eyewitness accounts that Britain’s most wanted man was holding a gun to his neck.
Dozens more armed police were on stand-by as the manhunt appeared to be reaching its climax.
Officers at the scene confirmed they had tracked down the former nightclub doorman and a process of negotiation was under way.
Eyewitnesses described how Moat was lying down pointing his gun at himself while surrounded by armed police and negotiators during the stand-off.
They also heard shouting while one man said Moat was chased through the village and was heading east before being cornered at the primary school tennis courts and bowling green.
Retired taxi driver Dave Murray, 67, of Knocklaw, said: “There is nowhere for him to go, the river is on one side and this road and all the police on the other.”
Peter Abiston told the BBC: “He’s holding what appears to be a shotgun under his chin.”
He said Moat, who was wearing dark-coloured clothing with a baseball cap and white trainers, had his back to the river and police were positioned around 20ft away from him.
Mountain biker Ben Storey had been out cycling when he inadvertently stumbled across the police operation as he rode across a bridge near the river in an area known as The Steppies.
“There was about 10 armed officers and they all had their guns pointed at one man,” the 19-year-old builder said.
Chris Robertson told the BBC he thought he had seen Moat holding a sawn-off shotgun to his neck.
He said: “We walked over and saw the guy standing on the other side of the river. He looked like he had a sawn-off shotgun pointing to his neck.”
Speaking over the phone to reporters, he added: “As far as we know they’re in the woods. Basically the whole place is under siege.”
Paula Mason told the BBC her mother was “terrified” as she was trapped in her home inside the police exclusion zone.
“She said a marksman told her to get in with a gun,” she said.
She added that her mother was not being allowed to leave her home and was “absolutely petrified”.
“She said he is sitting with a gun to his head. The police are surrounding him.”
People living in the area allowed armed police to gain access to the river banks.
A local woman said a search at around 2.15am, including the use of the police helicopter, focused on the same spot earlier.
A Northumbria Police spokesman said: “A man who fits the description of Raoul Thomas Moat has been located in the riverbank area in the vicinity of Rothbury.
“Police are currently negotiating.”
Armed police descended on the village as the hunt for the fugitive spread to the countryside north from Newcastle.
Tonight’s dramatic scenes followed the news that detectives were pursuing “valuable” new leads a week into the investigation after recovering three mobile phones used by Moat during his time on the run.
Experts said the devices could contain a goldmine of information about the former nightclub doorman, including details about his calls, texts, contacts, and even his former location.
The first of the three handsets was found in Birtley in the early hours of Saturday – at the scene where Moat’s ex-lover Samantha Stobbart, 22, was shot and her new boyfriend, Chris Brown, 29, killed.
A second phone, used to make the two 999 calls to police before and after 42-year-old Pc David Rathband was shot early on Sunday, has also been recovered - but police would not say from where or when.
The third was spotted by a member of the public in the Rothbury area.
Police said it had not been used by the gunman since the two alleged hostages, Karl Ness and Qhuram Awan, were found on Tuesday.
Both have since appeared in court charged with conspiracy to murder.