Staff at the BBC were reminded in an email sent on Thursday morning that they should use the word "bomber" instead.
One headline on the BBC News website initially appeared as "Bus man may have see terrorist" and also used the word "terrorist" in the story.
Later, however, this same story appeared on the site with the headline: "Passenger believes he saw bomber". There was also a new introduction omitting the word "terrorist".
The BBC's guidelines state: "The word 'terrorist' itself can be a barrier rather than an aid to understanding. We should try to avoid the term, without attribution. We should let other people characterise while we report the facts as we know them."
However, the move has lead to criticism of the BBC, with the Daily Telegraph reporting that Rod Liddle, former editor of BBC Radio 4's 'Today' programme, has accused it of "institutionalised political correctness" in its coverage of British Muslims.
Hours after the bombs went off on Thursday morning, Prime Minister Tony Blair said it was fairly clear that the attacks were the work of terrorists.
Foreign secretary Jack Straw said the attacks bore all the "hallmarks" of Osama Bin Laden's Islamic terror network Al-Qaeda.
The BBC has denied that there is a ban on the use of the word "terrorist".
For the BBC, the attacks have seen people flock to its websites for news. BBC News Online coverage on the day of the attacks brought an average 115.7m page impressions to bbc.co.uk -- far more than any other time in the site's history.
The most requested story was "London rocked by terror attacks" accessed 15.3m times during the day. The previous record was 2.3m for the result of the US Presidential election last year.
In addition, BBC One's 'Panorama Special: London Under Attack' was the highest rated Panorama for over a year with 3.7m viewers on Sunday night.
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