A man has died and two are injured after police responded to a reported machete attack in south-east London.
The government is reported to be treating the attack as a suspected terrorist incident and the prime minister said it was "truly shocking".
Eyewitnesses said a man was assaulted in a Woolwich street by two individuals who were later shot by officers.
Local MP Nick Raynsford said the dead man was a soldier at Woolwich barracks but this has not been confirmed.
Home Secretary Theresa May has summoned a meeting of the government's emergency response committee Cobra to assess the incident.
It is understood she has also requested updates from the Metropolitan Police Commissioner, Bernard Hogan-Howe, and the head of MI5.
Whitehall sources have told the BBC it is "a fair supposition" that the incident was a terrorist incident but police have not commented publicly on the suggestion.
BBC political editor Nick Robinson said the police view is that the attack may have been filmed and footage may exist.
People carrying out the attack were heard to say Allahu Akbar [God is Great], said our political editor.
On Twitter, the Mayor of London Boris Johnson described the attack as a "sickening deluded and unforgivable act of violence".
'Guys were crazed'
London Ambulance Service confirmed one man had been found dead at the scene.
It said two men had been taken to hospital, one in a serious condition.
One of the men was airlifted from the scene, and another was taken away by road ambulance
A spokesperson said an air ambulance and four crews had attended the scene.
Witnesses reported by the Press Association said two people had been shot after armed police were called to an incident in which a man was attacked with a machete-style knife.
One witness, identified only as James, said two men had attacked another man, aged about 20, who was wearing a T-shirt of military charity Help for Heroes.
"These two guys were crazed. They were just animals. They dragged him from the pavement and dumped his body in the middle of the road and left his body there," he told LBC radio.
He said after the "horrendous" attack, the two men, who were also in their 20s, stood around, waving knives and a gun, and asked people to take pictures of them "as if they wanted to be on TV or something".
"They were oblivious to anything, they were more worried about having their photo taken, running up and down the road," he said.
Thomas, a witness who contacted the BBC, said: "I got there minutes after it happened because you could hear gunshots from Woolwich High Street.
"Basically two men carried out an axe attack on a young army cadet walking along the street, by the looks of things the police responded and then shot them in front of the public, at the same time I couldn't really tell if the cadet was fatally or not hurt as police were crowded around him."
Mr Raynsford, the Woolwich and Greenwich MP, said he had spoken to local police and understood a number of weapons had been seized at the scene including a gun, knives, and a machete.
Metropolitan Police Commander Simon Letchford said the two attackers were shot by armed officers.
He said: "At approximately 2.20 this afternoon police were called to reports of an assault in John Wilson Street, Woolwich, where one man was being assaulted by two other men.
"A number of weapons were reportedly being used in the attack, and this included reports of a firearm.
"Officers including local Greenwich officers arrived at the scene, and shortly after firearms officers arrived on the scene.
"On their arrival at the scene they found a man, who was later pronounced dead. At this early stage I am unable to provide any further information about the man who has died.
"Two men, who we believe from early reports to have been carrying weapons, were shot by police. They have both been taken to separate London hospitals. They are receiving treatment for their injuries.
"I can understand that this incident will cause community concerns and I would like to reiterate that we are investigating the circumstances."
Meanwhile, the Independent Police Complaints Commission (IPCC) confirmed it had been informed.
In a statement, the IPCC said: "Investigators have been deployed to the scene and to the post-incident process."
Scotland Yard said the incident happened in John Wilson Street, the A205, at 14:20 BST.
On its Twitter account, the Metropolitan Police helicopter team called the incident "serious".
A Scotland Yard spokesman said: "Officers have responded to an incident...
"We believe at this stage officers were called to reports of an assault."
David Dixon, a local head teacher, told the BBC News Channel he walked out of the school gates and saw a body lying in the road a short distance away.
He then heard gunshots and instructed staff to lock all the gates of his school.
The air ambulance landed in the playground and most of the children have now gone home, he said.