British police on Sunday shot dead a man in London wearing a "hoax device" and suspected of stabbing two people, leaving one of them with life-threatening injuries, in an "Islamist-related" terrorist incident.
The Metropolitan Police said armed officers responded immediately "as part of a proactive counter terrorism operation" when they shot the attacker, who was declared dead at the scene -- a busy south London street packed with Sunday shoppers.
An eye-witness described seeing a man "with a machete and silver canisters on his chest" fleeing from police before they opened fire.
Sunday's events in Streatham, a largely residential neighbourhood in the capital, came just over two months after a convicted terrorist on early release from prison was shot dead by police on London Bridge after he stabbed two people to death.
The government responded by announcing longer sentences for terrorism offences, an end to early release and an increase in the counter-terrorism police budget in the coming financial year.
The latest attack unfolded at around 2:00 pm (1400 GMT) on Streatham High Road, a busy thoroughfare lined with shops.
The Met said a device was found strapped to the suspect's body and, after cordons were put in place, "it was quickly established that this was a hoax device".
"The incident was quickly declared a terrorist incident and we believe it to be Islamist-related", police said.
Three victims were taken to local hospitals, with one man's condition "life-threatening" and a woman described as receiving non-life threatening injuries.
A second woman received minor injuries, believed to have been caused by glass following the discharge of the police firearm.
Prime Minister Boris Johnson thanked the emergency services for their response. "My thoughts are with the injured and all those affected," he said.
London Mayor Sadiq Khan added: "Terrorists seek to divide us and to destroy our way of life -- here in London we will never let them succeed."
AFP reporters at the scene said the high street was blocked off with police tape, with buses backed up outside the cordon, as uniformed police officers kept the public away.
Helicopters circled overhead.
One eye-witness, who asked not to be identified, told Britain's domestic Press Association news agency that he saw the dramatic events unfold.
"I saw a man with a machete and silver canisters on his chest being chased by what I assume was an undercover police officer -- as they were in civilian clothing," he said.
"The man was then shot. I think I heard three gun shots but I can't quite remember." The eye-witness said he then sheltered in a library as other passers-by ran into nearby stores.
Unverified footage posted to social media purporting to capture some of the incident showed armed police officers surrounding a man lying on the ground on Streatham High Road.
They then abruptly moved away, urging onlookers to move back, as other emergency vehicles arrived at the scene.
Another eye-witness who gave first aid to one of the victims told LBC radio he heard what he thought was a car backfiring, then two, possibly three armed police officers.
"I didn't realise at the time I would be swept up in a terrorist incident. I thought this was someone who had shoplifted or people larking around," he added.
He used a blanket on one of the injured victims as a compress on their wounds, while first-aid equipment was brought from a nearby pharmacy, he said.
Local Green Party councillor and national Green Party co-leader Jonathan Bartley, called the incident an "absolute aberration".
He told AFP the area was "a very safe community with wonderful diversity". Former police tactical firearms advisor Andy Redhead said it was too early to speculate whether the dead man had been under surveillance.
British police do not routinely carry firearms but armed units can make the decision themselves to use lethal force.
"If they believe there's a threat to life... the only way to deal with that is to use firearms," he told LBC radio.
Britain downgraded the country's terrorism threat level from "severe" to "substantial" -- warning a terrorist attack is "likely" rather than "highly likely -- in early November, its lowest rating in more than five years. There have since been two terror incidents in the capital.
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