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After a nearly two-hour standoff in a Watertown neighborhood, Tsarnaev was taken from the scene by ambulance to a local hospital.

The standoff began just before 7 p.m., minutes after Massachusetts State Police announced that they had completed their door-to-door search in Watertown without locating Dzhokhar Tsarnaev.

WBZ-TV’s Jim Armstrong was in the area of Franklin Street when he heard what he described as 15-20 seconds of rapid gunfire. He was forced to take cover, and was quickly moved back to safety by police.

Boston Mayor Tom Menino confirmed to WBZ-TV that police had surrounded the bombing suspect inside a boat in the backyard of a home on Franklin Street. Sources say that a resident called police to report finding blood by the boat.

Police have identified Tsarnaev’s older brother, Tamerlan Tsarnaev, 26, as the other bombing suspect, killed during the manhunt at MIT.

Both suspects have been in the U.S. for at least a year, living as legal U.S. residents in Cambridge, said the official, who declined to be identified because he is not authorized to comment publicly.

At sunrise, Gov. Deval Patrick ordered a shutdown of all public transit and residents on the edges of Boston to stay indoors as a massive manhunt for the second suspect was underway.

“This is situation is grave and we are trying to protect the public safety,” said Massachusetts State Police Col. Timothy Alben.

Federal agents swarmed neighboring Watertown after local police were involved in a car chase and shootout with the men identified Thursday by the FBI as Suspect 1 and Suspect 2. During the pursuit, officers could be heard on police radio traffic describing the men as having handguns, grenades and other explosives.

The mayhem began at approximately 10:30 p.m. Thursday when police said the bombing suspects robbed a 7-Eleven store in Cambridge. Minutes later, police said, the men shot and killed an MIT campus officer responding to the robbery call. The terror suspects then fled in a stolen Mercedes-Benz, but were quickly spotted in Watertown where they exchanged dozens of rounds of gunfire with patrol officers.

Suspect 1 was shot by police and brought to Beth Israel Medical Center. He arrived at the hospital under cardiac arrest with multiple gunshot wounds and blast-like injuries to his chest. The second suspect fled on foot, leading to a tense manhunt that is still underway at this hour.

“We believe this to be a terrorist,” said Boston police Commissioner Ed Davis. “We believe this to be a man who has come here to kill people. We need to get him into custody.”

A transit officer was seriously wounded during the exchange of gunfire, officials said.

The FBI has yet to publicly confirm a connection between the events in Watertown and the twin explosions that killed 3 people and injured 170 others at the Boston Marathon on Monday. But according to Boston police, the suspect who remained at large was the “one in the white hat” seen in the photos released by the bureau on Thursday.

At around 1 a.m., two residents said they heard what sounded like firecrackers began going off in Laurel Street. When they looked out of their windows, they saw two young men taking cover behind a black Mercedes sports utility vehicle, in a shootout with dozens of police about 70 yards away. A police spokesman said there was a strong possibility that the incident was linked to the fatal shooting of a campus police officer at the Massachusetts Institute of Technology. The chaos that descended on the residential streets came as the community was still reeling from Monday’s bombings at the Boston Marathon that killed three and wounded more than 170.

Andrew Kitzenberg, 29, said he looked out of this third floor window to see two young men of slight build in jackets engaged in “constant gunfire” with police officers. A police SUV “drove towards the shooters,” he said, and was shot at until it was severely damaged. It rolled out of control, Mr. Kitzenberg said, and crashed into two cars in his driveway.

The two shooters, he said, had a large and unwieldy bomb. “They lit it, still in the middle of the gunfire, and threw it. But it went 20 yards at most.” It exploded, he said, and one of the two men ran towards the gathered police officers. He was tackled, but it was not clear if he was shot, Mr. Kitzenberg said.

The explosions, said Loretta Kehayias, 65, another resident, “lit up the whole house. I screamed. I’ve never seen anything like this, never, never, never.”

Meanwhile, the other young man, said Mr. Kitzenberg, got back into the SUV, turned it toward officers and “put the pedal to the metal.” The car “went right through the cops, broke right through and continued west.”

The two men left “a few backpacks right by the car, and there is a bomb robot out there now.” Police had told residents to stay away from their windows, he said.