A suspected knifeman shot dead on London Bridge had a fake suicide vest, Neil Basu, head of UK counter-terrorism policing, said.
The attack " but said police were keeping an open mind about the motive.
A device strapped to the suspect was a hoax, Mr Basu said.
Witnesses told how a person began attacking people with a knife before he was reportedly gunned down by armed officers.
Earlier Met Police said: "Police were called at 1.58pm on Friday, 29 November, to a stabbing at premises near to London Bridge, EC1.
"Emergency services attended, including officers from the Met and City of London Police.
"A number of people have been stabbed. We will provide further details of those injured when possible.
"A man has been shot by police at the location."
Several people were stabbed by the knifeman before he was grappled to the ground and disarmed by members of the public.
Footage on social media appeared to showed one man being pulled away by armed officers moments before the suspect is shot at point-blank range.
Another bystander could be seen carrying a large knife from the scene.
Police sources and eye-witnesses said the suspect appeared to be wearing a suicide vest.
After being shot, he raised his arms towards his head before lying still.
A Scotland Yard statement said: "A number of people have been stabbed."
No further details about casualties were available, although the London Ambulance Service declared it a major incident and one picture on social media appeared to show a body covered in a blanket.
Witnesses described a scene of panic around London Bridge, moments after the incident.
Witness Kelby McNally, OK! Online's editor, works in the Northern and Shell Building on Lower Thames Street near to London Bridge, said she initially thought a fire alarm had gone when she saw "loads of people just running".
She told the PA news agency. "There were loads of people just running, I thought it was a fire alarm or something, and then I saw two girls from my office who told me not to go back there.
"I asked what had happened, and they said they had heard gunshots and now everyone is running."
Prime Minister Boris Johnson said: "I'm being kept updated on the incident at London Bridge and want to thank the police and all emergency services for their immediate response."
Home Secretary Priti Patel wrote on Twitter: "Very concerned by ongoing incident at London Bridge. My thoughts are with all affected. I am grateful for the rapid response of our police and I urge everyone to follow their advice."
Footage from the scene appeared to show a white lorry straddling the northbound and southbound carriageways.
The video shows several officers surrounding the vehicle before moving to the rear to check its container.
London buses can be seen either side of the lorry while three police cars are parked next to it on the bridge.
Nurse Jackie Bensfield, 32, described how she asked to be let off a bus on London Bridge after she heard "five or six" gunshots.
Ms Bensfield, who was on her way home from work, said she exited the bus and "ran like hell" to escape the shots.
Connor Allen, who was in his van on the bridge when it was evacuated said: "Everyone just started running, you heard these pops and that was it. We just got out the van and started running."
One business owner told the PA news agency she had been crossing London Bridge to get to her shop on the north side when police officers stopped her.
She said that was when she heard at least five or six gunshots and said that her store has been evacuated.
The woman, who wished to remain anonymous, said: "We heard shooting, it was about five or six shots, I heard five or six quite clearly.
"All my staff have been evacuated."
