A Mark 16 horizontal mortar was found in a vehicle in Warrenpoint, Co Down, following a major security operation yesterday.
The alert, which led to a wide spread search operation in the town, was prompted by a number of telephoned bomb warnings.
The RUC said the device, which was found hidden in the boot of a parked Toyota Carina, was primed and ready to be fired. It was taken away last night for forensic examination after army technical officers carried out a controlled explosion.
Part of the town was cordoned off and the area around the sea front cleared while security forces carried out a search.
The alarm was raised before lunchtime and the all clear was given at about 7.30 p.m.
More than 30 homes, many of them with elderly residents, were evacuated and they took refuge in a local community centre. The 500 strong congregation at the nearby St Peter's Church were also evacuated just before Mass was to begin at midday.
Supt Alan Caldwell said. "It is blatantly clear that this was a murderous attempt by the IRA to kill members of the local security forces. It is unbelievable that they were prepared to place a lethal device in Warrenpoint at the weekend when the streets around this area were packed with people attending local places of entertainment.
"I wish to express our appreciation for the full co-operation the people of Warrenpoint displayed throughout this lengthy operation particularly those residents of Thomas Street and the immediate area," he said.