Three heroic cops and a quick-thinking street vendor stopped a madman from detonating a car bomb in the heart of Times Square Saturday night, law enforcement officials told the Daily News.

"It looked like someone tried to detonate it and we got to it in time," a police source said. "This is a big deal. It has the makings of a real car bomb."

The federal government views the incident a "potential terrorist attack," Homeland Security Secretary Janet Napolitano said Sunday.

"We're taking this very seriously," Napolitano told CNN's "State of the Union" program. "We're treating it as if it could be a potential terrorist attack."

Cops evacuated and shut down the Times Square are Saturday night, but all streets were reopened by 7:30 a.m. Sunday.

The T-shirt vendor - a Vietnam vet - told Officer Wayne Rhatigan there was smoke coming from a Nissan SUV on the southwest corner of 45th St. and Broadway about 6:30 p.m., sources said.

Rhatigan approached the car, saw the smoke and sprang into action.

"I did a lap around the vehicle. The inside was smoking," Rhatigan told the Daily News. "I smelled gunpowder and knew it might blow. I thought it might blow any second."

He alerted two rookie female cops patrolling the area. Together, they pushed hundreds of people away from the scene as they called for backup, he said.

The Fire Department and bomb squad rushed to the scene.

What they found was stunning: a running SUV packed with three propane tanks, two red 5-gallon plastic jugs of gasoline, a clock, electrical components and a canister of gunpowder, police sources said.

"We are very lucky," Mayor Bloomberg said at an early morning press conference at the scene, still in the tuxedo and red bow tie he wore to the White House Correspondents Dinner in Washington. "Thanks to alert New Yorkers and professional police officers we avoided what could have been a very deadly event."

"The full attention of city, state and federal law enforcement will be turned to bringing the guilty party to justice in this act of terrorism," Gov. Paterson said in a statement.

Police spokesman Paul Browne said cops were investigating a report that someone was seen running from the vehicle at some point and are reviewing security videotapes.

"It looks as if the perp was trying to light it up, and was interrupted by the cops, panicked and took off," a law enforcement source said.

Cops began evacuating the Crossroads of the World as the bomb squad used a robot to get inside the car.

Tourists rushed out of the Marriott Marquis hotel and several Broadway shows.