A knife-wielding terrorist wearing a fake suicide vest killed two people before being shot dead by police.
The attacker, who has not been named, was killed on London Bridge on Friday afternoon in full view of horrified onlookers.
Emergency services confirmed three people were taken to hospital but refused to state whether this was on top of the civilian fatalities.
Prime Minister Boris Johnson praised members of the public “for their immense bravery” after it emerged bystanders helped tackle the suspect to the ground and disarm him.
Mr Johnson, called a meeting of the Government’s emergency committee Cobra on Friday evening and cancelled his General Election campaigning events on Saturday. The Lib Dems have also decided to temporarily suspend campaigning.
Several people were stabbed by the knifeman before he was stopped in his tracks on London Bridge, which was the scene of the bloody massacre in summer 2017 where eight people were killed and 48 seriously injured.
Whitehall sources told the PA news agency that two of the victims had died and one person was in a critical condition in hospital.
Footage on social media showed one man being urged to move away by armed officers before the suspect was shot at point-blank range, as another bystander could be seen carrying a large knife from the scene.
Another video appeared to show a person on a stretcher, surrounded by emergency services staff and vehicles, being given CPR by responders following the attack.
The members of the public who intervened have been widely praised, with mayor of London Sadiq Khan hailing their “breathtaking heroism”.
Witnesses said the suspect appeared to be wearing a suicide vest but Neil Basu, the head of UK counter-terrorism policing, said the vest was a fake.
The London Ambulance Service declared it a major incident and one picture on social media appeared to show a body covered with a blanket.
The Independent Office for Police Conduct watchdog said it has launched an investigation into the police shooting of the London Bridge attacker which is standard for such incidents.
Witnesses described a scene of panic around London Bridge, moments after the incident.
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.
Cecilia Sodero was on the top deck of a bus going over London Bridge when she heard shots and saw a man lying on the ground with a “very scary device, like a bomb device”.
She told Sky News she saw “six people holding someone on the floor”, adding: “At some point someone says ‘oh, he has a knife’, and we were like, oh my gosh, this guy is supposed to stab someone and people was running away.
“The police officers finally they removed the knife. But then what happened is when they shot the guy, the guy is still alive, and they shoot and he’s trying to pull the black jacket off so I was able to see the vest that he was wearing.
“And it seems like a very scary device, like a bomb device, at that point we just ran away from the bus.”
Khadir Meer, chief operating officer of London Ambulance Service, said: “We can confirm we took three people to two London hospitals following the incident at London Bridge today.
“I would like to thank all our staff and the other emergency services who responded to this incident, including our medics at the scene, everyone in our control rooms and all those working hard behind the scenes.”