Armed police on the scene at Rutland Avenue as some residents were evacuated from their homes.
Police cordons remained in place in areas of Liverpool in the early hours of this morning after a car explosion at a hospital which killed one person and injured another.
Three men have been arrested under the Terrorism Act after the blast involving a taxi at Liverpool Women's Hospital at 10:59am on Remembrance Sunday.
Counter Terrorism Police North West said three men - aged 29, 26, and 21 - were detained in the Kensington area of the city, and arrested under the Terrorism Act in connection with the incident.
The male passenger of the car was declared dead at the scene and is yet to be formally identified.
The driver, also a man, was injured at the scene and remains in hospital in a stable condition.
Counter-terrorism police say they are keeping an open mind about the cause of the explosion and are working closely with Merseyside Police.
The three arrests took place in Sutcliffe Street in the Kensington area of the city, where witnesses reported seeing armed officers swoop on a terraced house in the afternoon.
Sections of Sutcliffe Street and Boaler Street remain cordoned off, with a heavy police presence at the scene as inquiries continue.
A similar police scene was in place at Rutland Avenue in Sefton Park, with counter-terror officers sighted in the neighbourhood.
Greater Manchester Police, providing updates from Counter Terrorism Police North West, said: "A large cordon is in place on Rutland Avenue in Liverpool and a small number of addresses have been evacuated as a precaution."
Officers wearing vests marked Negotiator entered the cordon earlier on Sunday afternoon.
Locals said police arrived from about 1pm as officers went on to guard a terraced property as the immediate surrounding area was cordoned off.
A number of residents in Rutland Avenue were evacuated from their homes, while the police operation remained ongoing past midnight with armed officers within the cordon.
A convoy of seven unmarked vehicles - three vans and four cars - entered the cordon early on Monday morning.
Earlier, images of a vehicle on fire, and later burnt out, outside the hospital were shared online.
A spokesman for Merseyside Police said: "So far we understand that the car involved was a taxi which pulled up at the hospital shortly before the explosion occurred."
Prime Minister Boris Johnson tweeted: "My thoughts are with all those affected by the awful incident in Liverpool today.
"I want to thank the emergency services for their quick response and professionalism, and the police for their ongoing work on the investigation."
The Chief Constable of Merseyside Police, Serena Kennedy, offered her reassurance over the incident.
"While I understand that today's incident may cause concern in our communities, it should be pointed out that events of this nature are very rare," she said.
"Merseyside Police will continue to liaise with community groups, community leaders, partner agencies and individuals in the coming days and weeks to make sure any concerns are addressed and ensuring that we provide the best possible service to local people.
"There will also be an increased and visible police presence on the streets of Merseyside and I would encourage people to engage with my officers and raise any concerns they may have.
Chief Constable of Merseyside Police, Serena Kennedy, explains what we know so far.
Liverpool Women's Hospital said visiting access had been restricted "until further notice". Patients were diverted to other hospitals where possible during most of Sunday.
In a statement, the hospital said: "Anyone with appointments at the hospital will notice an increased security and police presence on site."
Phil Garrigan, chief fire officer of Merseyside Fire and Rescue Service, said the car fire at Liverpool Women's Hospital was "fully developed" when two appliances arrived shortly after 11am.
He told reporters at the scene: "The operational crews extinguished the fire rapidly but as has been reiterated by the police chief constable, there was one fatality.
"Another individual had left the vehicle prior to the fire developing to the extent that it did."
Home Secretary Priti Patel tweeted: "I am being kept regularly updated on the awful incident at Liverpool Women's Hospital.
"Our police and emergency services are working hard to establish what happened and it is right they are given the time and space to do so."