With U.S. and British diplomats warning of possible new terror attacks in Saudi Arabia, police said Wednesday they arrested a suspect in a recent homicide car bombing and seized an arsenal -- AK-47 assault rifles (search), explosives, grenade launchers and a surface-to-air missile.

The arrest was the first in the bombing of the Muhaya housing compound (search) in the capital Riyadh on Nov. 8, which killed 17 people and wounded more than 120. American and Saudi officials blamed the attack the Al Qaeda terrorist network of Usama bin Laden, a Saudi exile.

Security was tight in Riyadh on Wednesday night. Armored personel carriers were seen parked outside of western housing complexes and soldiers armed with semi-automatic rifles stood behind sandbags at checkpoints set up at key intersections throughout the capital.

The Saudi Interior Ministry, in charge of the kingdom's police, issued a statement saying the suspected Islamic militant was found hiding with the cache of weapons and "pamphlets inciting terrorist acts." It said the man was arrested a week ago but that his identity would not be revealed to protect the investigation.

"Searches and investigations are continuing to arrest all those related to this terror cell," the statement said.

The cache seized with the suspect included a SAM-7 surface-to-air missile capable of downing a plane at low altitude; 20 high explosive hand grenades; 89 electrical detonators; blocks of explosives; six booby-trapped mobile phones; three computers; and Saudi currency worth $354,000.

The arrest comes with tensions high in the Saudi capital after attacks on foreign housing compounds in May, the November attack, and renewed American and British warnings this week of possible new attacks on housing compounds for foreigners.

An American businessman who has lived in Saudi Arabia for 15 years admitted that he does not feel as safe as he once did.

"Saudi Arabia is not as safe at it used to be. Its a big surprise to everybody that something like that [the attacks] could happen in Saudi Arabia," William M. Barilika from Stamford, Conn. said he has been getting telephone call from people at home asking him to return to the United States.

"I don't try to think about it too much, if i did i wouldn't be hear any longer."

The U.S. government issued a travel warning for Americans to "defer non-essential travel to Saudi Arabia. Americans are reminded of the potential for further terrorist actions against U.S. citizens abroad, including in the Persian Gulf region."

The warning said one compound in Riyadh -- Seder Village (search) -- has been under "active surveillance" by terrorists and that other housing complexes may also be targeted.

In response, the U.S. Embassy has restricted American employees and dependents from visiting housing compounds in the Riyadh area between the hours of 6 p.m. and 6 a.m., except for official business.

"The U.S. Government continues to receive indications of terrorist threats aimed at American and Western interests, including the targeting of transportation and civil aviation," a State Department warning read.

On Wednesday, an Interior Ministry official criticized the latest U.S. warning as mere speculation. The official, who spoke on condition of anonymity, said such warnings should be issued "in cooperation with Saudi authorities or else they would lead to disorder and fear within those living in Saudi Arabia."

Saudi Arabia has been under pressure to show it is more active in the battle against terrorism since the Sept. 11 attacks, in which 15 of the 19 hijackers were Saudi citizens. The pressure has increased with the bombings in the Saudi capital since May.

The latest attack, in November, shocked many in the Arab world because the complex attacked did not house Westerners but Arabs and other Muslims working in the kingdom. Officials said the attack showed the terrorists would even attack their own people to try to oust the Saudi royal family.

In that attack, two assailants -- identified later as Saudis -- drove a jeep disguised as a police vehicle into the compound and detonated its explosives.

The bombing was preceded by warnings of a pending terrorist attack issued by the Australian, British and U.S. embassies in Riyadh.

In May, Islamic homicide bombers attacked three compounds for foreigners in Riyadh, detonating vehicle bombs that killed 35 people including the nine assailants. After the attacks, security forces detained about 600 suspects, of whom nearly 200 were soon released.

The attacks generated considerable soul-searching among Saudi intellectuals, with some newspaper columnists saying the strict interpretation of Islam followed in schools and mosques could have contributed to the militancy.

The government responded by announcing new guidelines for mosque sermons and promising to allow citizens to vote in municipal elections -- a first in a kingdom that has no parliament.