The UVF is suspected to be behind a security alert which led to Irish Foreign Affairs Minister Simon Coveney being evacuated from a peace and reconciliation event in north Belfast.
Mr Coveney had been addressing the event organised by the John and Pat Hume Foundation when he was ushered from the room.
The Houben Centre, on the Crumlin Road, was evacuated and a funeral service at nearby Holy Cross church was also disrupted.
PSNI Assistant Chief Constable Mark McEwan said the driver of a van was threatened by two gunmen and forced to drive a device which he believed to be a live bomb to Holy Cross church.
He condemned the “disgraceful actions” which caused more than 25 homes to be evacuated, disrupted local schools and also a funeral.
Addressing media at police headquarters on Friday evening, he said detectives believe loyalists paramilitaries were responsible, and that the UVF was the primary line of inquiry.
“This morning, some time between 9am and 10am, a van was hijacked in Sydney Street West off the Shankill Road, Belfast,” he said.
“The van driver was threatened by two gunmen and forced to drive his white Vauxhall van a short distance to another street and a device was then placed in the van.
“The victim was then forced to drive the van to Holy Cross chapel.
“Just think about this, the victim believed at this point he was driving a van containing a live bomb and that his family were being threatened.
“The local community were also impacted. Over 25 homes were evacuated, local schools were affected and vulnerable residents in a local nursing home had to be moved to another part of their home.
“Most shamefully, a funeral taking place in the chapel was also disrupted, causing further grief to that family.
“This evening upon further examination, the device has been declared a hoax. It was clearly designed to cause maximum disruption to the local community.
“At this early stage of the investigation, our assessment is that these crimes were carried out by loyalist paramilitary groups.
“We’re keeping an open mind but one of the primary lines of investigation is the UVF.”
Mr McEwan also issued an appeal for information about anyone with any information about the event, gun men or movements of the van, to come forward to police.
Mr Coveney has previously been targeted in sinister graffiti in a loyalist area of Belfast.
Asked whether Mr Coveney had been the target of the incident, Mr McEwan said he would not speculate on motivation at a very early stage of the investigation.
The incident has been condemned by politicians.
Secretary of State Brandon Lewis described the actions as “reprehensible”.
“Today’s incident at the Houben Centre in North Belfast is a reminder that there is a small minority willing to use violence to advance their goals,” he said.
“My thoughts are with the driver who faced a terrifying ordeal, the family that was holding a funeral, as well as with Simon Coveney and everyone else who was impacted.
“These actions are reprehensible. I utterly condemn those involved and give my thanks and reiterate my full support to the PSNI and security partners and urge anyone with any information to contact the police.”
Earlier, DUP leader Sir Jeffrey Donaldson welcomed the widespread condemnation, adding most people “want to get on with their lives and have no truck with those who cling to violence”.
Sinn Féin Stormont leader Michelle O’Neill also condemned those involved, adding: “Those determined to cause instability and disruption will not succeed. Those of us committed to peace will not be deterred.”
Church of Ireland Archbishop the Rev John McDowell described the incident as shameful.
“Peace and stability in Northern Ireland are maintained and advanced through good relationships at all levels within Ireland and across these islands, and there is no place for violence or the threat of violence in our society,” he said.
Mr Coveney had been speaking about the importance of reconciliation in Northern Ireland.
He told the event: “The patient work of reconciliation and deepening of relationships does need to continue on our own island.”
In a tweet afterwards, the Foreign Affairs Minister thanked the efforts of the PSNI.
“In Belfast with the Hume Foundation to honour John & Pat’s legacy of peace for all communities.
“Saddened & frustrated that someone has been attacked & victimised in this way and my thoughts are with him & his family.”