A public safety operation is underway.
St Columb’s College is being evacuated and a number of cordons have been put in place in the immediate area.
A police spokesperson said: “No homes have been evacuated at this time.
“We will bring you more information when we are in a position to.”
The school said the alert was sparked by the discovery of a “potential suspicious device” on Collon Lane.
A recorded message on the school’s answer machine asked parents to collect their children if possible from the school’s pitches.
The school said it was also arranging buses for pupils to be brought to the Foyle Street depot.
Sinn Féin MLA Karen Mullan said: “There is major disruption at the Collon Lane area this morning following a security alert.
“St Columb’s College has been evacuated and pupils and staff have been sent home.
“This is disgraceful and the last thing that pupils, teachers and parents need this morning, particularly as children return to the first day back after the break.
“I would urge people to avoid the area until the alert ends.”
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