Dame Eliza Manningham-Buller said that MI5 was aware of nearly 30 "plots to kill people and to damage our economy".
The risk to Britain was "sustained... not a serious of isolated incidents" and the "serious, growing threat..." from terrorism would last a generation, she added.
Her assessment, made in a rare public speech, came after a Muslim convert was jailed for life Tuesday for plotting to kill thousands of people in devastating attacks in Britain and the United States.
Dhiren Barot, 34, planned suicide attacks and atrocities involving a radioactive "dirty bomb".
Dame Manningham-Buller said MI5's caseload of British-based terror sympathisers, many of them British citizens, had increased by 80 percent since January and she was alarmed by the "scale and speed" of radicalisation.
"Martyrdom" videos of suicide bombers were motivated in part by "their interpretation as anti-Muslim of UK foreign policy, in particular the UK's involved in Iraq and Afghanistan," she told academics in east London.
Prime Minister Tony Blair and his government have repeatedly denied a link between extremism and British foreign policy.
"Today my officers and the police are working to contend with some 200 groupings or networks, totalling over 1,600 identified individuals -- and there will be many more we don't know -- who are actively engaged in plotting, or facilitating, terrorist acts here and overseas," Dame Manningham-Buller said.
"What we see at the extreme end of the spectrum are resilient networks, some directed from Al-Qaeda in Pakistan, some more loosely inspired by it, planning attacks including mass casualty suicide attacks in the UK."
The MI5 director-general was quoted in the British press as saying that while home-made, improvised explosives may be being used today, chemical, bacteriological, radioactive and even nuclear material will be used in the future.
Youth targeted
Dame Manningham-Buller also expressed concern that many involved were young men and teenagers as young as 16.
"More and more people are moving from passive sympathy towards active terrorism through being radicalised or indoctrinated by friends, families, in organised training events here and overseas..." she added.
"It is the youth who are being actively targeted, groomed, radicalised and set on a path that frighteningly quickly could end in their involvement in mass murder of their fellow citizens or their early death in a suicide attack or on a foreign battlefield."
Britain has been on high alert after the July 7, 2005 bombings on London's public transport network that killed the four Islamist extremist suicide bombers and 52 commuters and injured more than 700.
On August 10 this year, police and security services foiled what they said was a plot to blow up transatlantic passenger jets using liquid explosives.