The man held following the incident at Manchester Arndale Centre has been arrested on suspicion of the commission, preparation and instigation of an act of terrorism, Greater Manchester Police Assistant Chief Constable Russ Jackson has said.
Counter-terror police are investigating the incident which saw a knifeman run amok in the shopping centre “lunging at people” at random.
Three people were taken to hospital with stab injuries following the attack at around 11am on Friday.
Witnesses described a scene of terror as shoppers, some with injuries, sought refuge in stores.
Greater Manchester Police initially stated five people had been injured, but later amended the figure to four.
A 19-year-old woman and another woman for whom no age was given were both taken to hospital with stab injuries and their condition was described as stable by the force.
A man in his 50s was also hospitalised with stab wounds while a woman in her 40s was treated by paramedics at the scene but was not stabbed.
North West Ambulance Service (NWAS) said one patient had suffered “serious” injuries.
NWAS tweeted: “We have treated four patients, including one patient with serious injuries, and all have been taken to hospital.”
One shop worker, who gave his name only as Jordan, 23, told the PA news agency: “A man was running around with a knife lunging at multiple people, one of which came into my store visibly shaken with a small graze.
“Soon after, security staff told all retail staff to close their doors and move the public to the back of the stores.”
Jordan, who has only been working at the centre for a few months, said the attack took place on the ground floor.
A spokesman for Greater Manchester Police said: “In these early stages we are keeping an open mind about the motivation of this terrible incident and the circumstances as we know them.
“Given the location of the incident and its nature, officers from Counter Terrorism Police North West are leading the investigation as we determine the circumstances.
“A man in his 40s – who was arrested at the scene on suspicion of serious assault – remains in custody for questioning.”
Freddie Houlder, 22, from Market Drayton, was in the centre when he heard “a load of screams just outside” the shop he was in.
He said a woman then came into the shop and told others “a guy just ran past the shop and tried to stab me”.
Mr Houlder added: “Luckily she had quite a thick jacket – she thought originally it was a fake knife because of how easily it grazed off but police came in and said it was a real knife and she burst in to tears.”
He said he was evacuated several minutes later, at which point he saw “a bunch of curtains covering someone seriously injured or dead, I don’t know”.
“I definitely don’t think it was gang violence because this guy was going around trying to stab random people, I believe.”
Tina Concar, 52, from Miles Platting, Manchester, said she was evacuated from the centre after the attack.
“We only knew something was unfolding as loads of people started running towards us, at first shouting ‘bomb’.
“But then someone mentioned that a person had been stabbed. People were panicking and running as security staff were running the other way.”
Prime Minister Boris Johnson said he was “shocked by the incident and my thoughts are with the injured and all those affected”.
Bev Hughes, Greater Manchester’s deputy mayor for policing, crime and fire, said: “I want to praise Greater Manchester’s emergency services for their swift and professional action.
“Our thoughts are with the five people injured.
“The scene has been secured and all emergency services are engaged in ensuring public safety – the investigation is ongoing.”
The Arndale Centre is just a few hundred yards from the Manchester Arena and Victoria railway station – both of which have been the scene of recent terror attacks.
Twenty-two people were killed in May 2017 when Salman Abedi detonated a suicide bomb in the Manchester Arena following an Ariane Grande concert – the youngest victim was just eight years old.
Last New Year’s Eve, three people including a police officer were seriously injured after a 25-year-old man launched a knife attack on passers-by.
The suspect was heard to shout “Allah” and “Long live the Caliphate” during the incident – he was arrested on suspicion of attempted murder and his since been detained under the Mental Health Act.
In 1996, the Arndale Centre was damaged in a major bomb attack by the IRA in which a 1,500-kilograms device loaded on a lorry was detonated on Corporation Street.
More than 200 people were injured in the explosion, although there were no fatalities.