Mohammed Abdul Kahar, 23, who was shot and injured in the dawn raid, and 20 year-old Abul Koyair had been held for questioning for a week as officers scoured their house, reportedly looking for some kind of chemical weapon.
The search, however, was completed without police finding anything, raising questions about the quality of police intelligence almost one year after the July 7 London bombings, experts said.
In addition, the raid which police said was prompted by "specific intelligence" fuelled anger and mistrust among London's large Muslim community which claim they are being unfairly targeted by the authorities.
Mr Kahar's shooting, which is under investigation, also stirred memories of the mistaken shooting by police of a Brazilian man on the subway last July.
Police, who are in the difficult position of either acting on potentially flimsy intelligence or checking it out further and risking another attack, said the hunt continued for the suspected terrorist device.
A spokesman said: "The intelligence received by police continues to be developed and the MPS (Metropolitan Police Service) will continue to exhaust all lines of inquiry."
Attempting to ease tensions between the police and the Muslim community, Andy Hayman, assistant commissioner of the Metropolitan Police, said he would like to thank them for their tolerance.
"We have worked with the local community since the operation on Friday to keep them updated and have listened to their concerns," Hayman said.
"As we look forward we will continue to engage with all communities and
respond to issues that are raised."
However, more than 100 Muslims held a demonstration in protest at the raid. They waved placards emblazoned with slogans, including: "Tony Blair terrorist" and "Blair: shoot first ask questions later".