The problem is set to blight Britain for a generation, an MI6 officer warned in secret intelligence documents.
The Secret Intelligence Service official warned that radicalised British Muslims who undertake training will become 'suicide operatives' who will target innocent civilians.
British-born terrorists were behind the July 7 2005 London bombings and the four men involved had been radicalised and received terror training abroad.
The warning came in a briefing of U.S. congressmen who visited the UK in 2008 and was contained in a cache of American diplomatic cables obtained by whistleblowing website WikiLeaks.
The documents also reveal American concerns that British intelligence workers are failing to contain domestic terrororist because of budget cuts.
The warning was revealed by the Daily Telegraph as the independent reviewer of anti-terror laws claimed that European human rights rulings had made the UK a 'safe haven' for suspected terrorists.
According to the U.S. embassy's record of the congressmen's visit, the MI6 official told them that the UK was 'wholly or largely dependent' on help from the CIA and other American sources for monitoring terrorism.
'Should these extremists then decide to become suicide operatives, HMG (Her Majesty's Government) intelligence resources, eavesdropping and surveillance would be hard pressed to find them on any "radar screen".'
The document said that the officer 'described this as a "generational" problem that will not go away anytime soon'.
Home-grown terrorists were responsible for the July 7, 2005 London Tube bombings in which 52 people died.