Testifying in the trial of a Chicago businessman accused of helping to plan the attacks, David Headley said that Pakistan's Inter-Services Intelligence agency (ISI) and the Pakistani militant group Lashkar-e-Taiba (LeT) coordinated with each other.
After pleading guilty last year to charges of being a co-conspirator in the attacks, which were carried out by LeT militants, he has taken the stand as a star witness in the case against Tahawwur Rana, a Pakistan-born Canadian citizen.
His trial is being closely watched for what testimony might reveal about suspected links between LeT and the ISI, which has come under increased scrutiny since Osama bin Laden was killed by US special forces on 2 May near the Pakistani capital, Islamabad.
Headley described his initial contacts and training with LeT on repeated trips to Pakistan and said he was introduced to a retired Pakistani military officer at a mosque.
The 50-year-old also said the LeT militants consulted with Pakistani intelligence officials on a number of matters.
"These groups operated under the umbrella of ISI … they coordinated with ISI," Headley testified under questioning.
He said that that he had received weapons and leadership training with LeT since 2000 and it was his understanding that the group and the ISI helped each other.
"They coordinated with each other and ISI provided assistance to Lashkar," said Headley.
Rana, who denies the charges against him, is accused of using his immigration services firm in Chicago to provide a cover story for Headley's scouting work and to serve as a conduit for communication with militants.
US prosecutor Sarah Streicker said that although Rana did not carry a gun or throw a grenade, he was complicit in the violence in Mumbai.
"He not only knew of the attacks, he approved of them, and agreed with them," Streicker said in her opening statement to the jury in the US District Court in Chicago.
Some Pakistanis accused in the case but not in US custody knew about Rana and were "appreciative of his assistance," she said.
At one point after the 2008 attack, Streicker said Rana told Headley "the Indians deserved it."
Headley told he court he had wanted to wage war against India in the disputed territory of Kashmir and was told he would get another assignment after Mumbai. He was directed to change his given name, Daood Gilani, to ease travel in India.
Arrested on a trip to Pakistan's northeast while seeking a contact who could help smuggle weapons into India, Headley said he was freed after explaining his connection to LeT by an ISI officer named "Major Ali."
He also told the court that he had suggested to an LeT operations chief named Zaki that a lawsuit be filed against the United States for labelling LeT a terrorist organization.
"Zaki said we would have to take ISI into confidence before making such a move … He meant to consult with ISI," he said.
Headley, who has been convicted twice of importing heroin into the US and is a former informant for the US Drug Enforcement Administration (DEA), said he sold his alcohol shop in New York in September 2001 and sent the proceeds to Rana, who became his confidant.
A defence lawyer for Rana challenged Headley's credibility, suggesting that he changed his story repeatedly to his advantage and duped Rana.
"Headley told his own wife after the attack that 'I acknowledge that I made a fool out of him'," said the lawyer, Charles Swift.
Rana and Headley were also charged with participating in a second plot with Pakistani militants. That plot, never carried out, allegedly targeted a Danish newspaper that published cartoons of the prophet Muhammad.
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