One person was killed and at least two people were wounded in a violent attack near a military barracks in London, British officials said yesterday.
Prime Minister David Cameron called an emergency security meeting in response.
Scotland Yard said police officers responded to reports of the assault yesterday afternoon in the London neighbourhood of Woolwich, just a few blocks from a military training barracks. London Ambulance Service said a man was found dead at the scene and two others were taken to hospitals, one in serious condition.
Britain's Ministry of Defence said it was urgently investigating reports that a serving soldier was involved in the incident.
The BBC's website quoted senior Whitehall sources as saying the Woolwich suspects are thought to have tried to film their attack while shouting Allahu akbar (God is great).
A British government official said details had emerged that were indicative of a "terrorist-motivated attack".
Live television images of the scene showed a trail of blood staining a road, cordoned- off streets and crime scene investigators marking the area.
One eyewitness told BBC: "I was walking my dog and heard some shouting about 50 yards from me. A man was running down the road and being chased by a car. The car then screeched to a halt and two men got out. One had some kind of sword. They literally swung at the other guy's head."
David Dixon, head teacher of a nearby primary school, made sure children were inside and put the school into lockdown mode. He said he then heard shots fired.
Luke Huseyin, 32, who lives in a flat close to the incident, said: "I was at home and heard a big bang. I looked out of the window and saw that a car had crashed.
"Then two black guys got out of the car dragging a white guy across the road towards the wall. One of the guys had a knife that looked about a foot [30cm] long and a machete, and the other bloke had a gun.
"They started slashing him up with the knife and hitting him in the stomach with the machete.
"I don't think it took long before he was dead. There were people passing by who were screaming and running away. I've never seen anything like it."
Metropolitan Police Commander Simon Letchford said: "At 14.20, we 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 reported as being used in the attack, and this included reports of a firearm.
"Two men, who we believe from early reports to have been carrying weapons, were shot by police. They have been taken to separate London hospitals."
The barracks - which house a number of the King's Troop Royal Horse Artillery and independent companies of the Grenadier and Coldstream Guards - were the venue for shooting events at the 2012 London Olympics.
Associated Press, Bloomberg, Reuters