Dzhokhar Tsarnaev, 19, remains at large after he escaped a shoot-out in which another suspect, his brother, Tamerlan Tsarnaev, died.
Police said they had searched 60-70% of a locked-down area of a Boston suburb.
Three people died and more than 180 were hurt when two bombs exploded near the finish line of Monday’s Boston Marathon.
On Friday afternoon, Col. Timothy Alben of the Massachusetts State Police said officers in Watertown were searching “door to door, street to street” for the suspect, but there was as yet no word on his whereabouts.
Massachusetts Governor Deval Patrick said there were “continuing developments” in the investigation, and that an order to stay indoors remained in place across the whole of Boston and surrounding suburbs.
Earlier the FBI released images of the two men they were hunting in relation to the bombing.
Police said one suspect – widely named in the US media as Tamerlan Tsarnaev – had been killed early on Friday, and they were looking for another suspect, later named as the dead man’s younger brother Dzhokhar Tsarnaev.
Both are said to be of Chechen origin, and are reported to have moved to the US about 10 years ago.
The manhunt began late on Thursday when university police officer Sean Collier, 26, was killed on the Massachusetts Institute of Technology (MIT) campus.
Dzhokhar and Tamerlan Tsarnaev carjacked a driver at gunpoint and drove away with the driver still in the car. They later released the man unharmed.
Police chased the suspects, who threw bombs and exchanged gunfire with police, seriously wounding one officer.
In the Boston suburb of Watertown, officers and the men were involved in a gun battle lasting 10 minutes, according to witnesses.
The authorities in Massachusetts Bay have suspended the transport system and no vehicles are being allowed in or out of the Watertown area.
The warning to stay indoors was later extended to the whole of Boston, in what correspondents said was an unprecedented move.
Meanwhile, President Barack Obama was briefed on developments in the manhunt and investigation for about an hour in the White House Situation Room.
Secretary of State John Kerry, also at the briefing on video link, said the authorities were “part of the way there” in bringing the Boston terror suspects to justice, AP reported.
Overnight, video footage emerged showing a fully-clothed suspect lying on the floor, surrounded by police. More video was shown by US media of a suspect being led into a police car after being stripped of his clothes.
But it is not clear who the men were, or what happened after their apparent arrests.
Dr. Richard Wolfe, of the Beth Israel Deaconess Medical Center, said an individual was brought in with multiple blast and gunshot wounds to his upper body.
He was in cardiac arrest when he arrived at hospital and despite attempts to resuscitate him, he was pronounced dead at 01:35 a.m., Dr Wolfe said.
The authorities were investigating whether the dead man had a home-made bomb strapped to his body when he was killed, reports said.
Boston police Commissioner Ed Davis said he believed the man being hunted in the Watertown area was a “terrorist”.
“We believe this to be a man who came here to kill people,” he said.
A grey Honda CRV vehicle, which reports said had been sought in connection with the suspects, was found on Friday morning in the Boston area, Connecticut police said.
Dzhokhar Tsarnaev’s father, Anzor Tsarnaev, said his son was a second year medical student in the US and was hoping to be a brain surgeon.
He also said that he believed the secret services had framed his sons.
“It was a terrorist attack carefully organized by secret services – I don’t know which ones. My son used to go to a mosque, so they once paid us a visit to ask why he is doing that.
“Yes, there was such an episode. So they put all the blame on him and shot him. That’s it.”
Ruslan Tsarni, an uncle of the suspects who lives in Maryland, said he was “ashamed” of their alleged involvement in the bombings.
“Yes of course we’re ashamed, they’re the children of my brother,” he said.
Asked what the bombers’ motives may have been, Ruslan Tsarni replied: “Being losers, hating everyone around them.”
Monday’s attack on the Boston Marathon killed Martin Richard, 8, Krystle Campbell, 29, and Lu Lingzi, 23, a postgraduate student from China.
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