Police shot dead a man in south London on Sunday after two people were stabbed in what was described as a "terrorism-related incident".

“A man has been shot by armed officers in Streatham (south London). At this stage it is believed a number of people have been stabbed. The circumstances are being assessed; the incident has been declared as terrorist-related,” the police said on Twitter.

Police said later the man they had shot had been pronounced dead, and two people had been wounded.

“We await updates on their condition,” police said, adding the scene of the incident was now fully contained.

Karker Tahir, a man who was working nearby, told Sky News that the man was shot three times. "Police had told people in the area to leave because the man had a bomb in his bag," Tahir said.

Armed police cordoned off the area, on the main shopping street in Streatham, a busy residential district south of the River Thames. Police said people should avoid the area.

Several videos of the scene were posted on Twitter, but not verified by Reuters. In one, filmed from inside a shop across the road, a man can be seen lying on the street while at least two armed police officers point their guns from behind an unmarked car with its blue lights flashing.

Helicopters flew overhead and police cars were in surrounding streets, with the area blocked off by tape.

Prime Minister Boris Johnson said on Twitter: “Thank you to all emergency services responding to the incident in Streatham, which the police have now declared as terrorism-related.”

“My thoughts are with the injured and all those affected,” he added.

The last such incident in London was in November 2019, when police shot dead a man wearing a fake suicide vest who stabbed two people to death and wounded three more before being wrestled to the ground by bystanders. Authorities called that a terrorist attack.

London's mayor, Sadiq Khan, said in a statement after Sunday's incident: “Terrorists seek to divide us and to destroy our way of life — here in London we will never let them succeed.”