Several witnesses described seeing a "beheading" while another described seeing a man wearing a Help for Heroes T-shirt being attacked with a machete-style knife and dumped in a south east London street.
Officers were called to John Wilson Street in Woolwich at around 2.20pm today and the immediate area was shut down.
MP Nick Raynford tells the BBC that one person is dead and two seriously injured. Reports suggest a man was attacked in the street by two individuals, followed by a police shooting.
Local head teacher David dixon told the BBC News Channel he walked out of the school gates and saw a body lying in the road a short distance away, he then heard gunshots.
One witness, identified as James, said he and his partner saw two black men attack the young victim with knives, including a meat cleaver.
"They were hacking at this poor guy, literally," he told LBC.
"They were hacking at him, chopping him, cutting him."
Fighting back tears, James said the men treated their victim as a "piece of meat" after he was dead.
"These two guys were crazed," he told the radio station.
"They were just animals.
"They dragged him from the pavement and dumped his body in the middle of the road and left his body there."
He said that after the "horrendous" attack, the two men, in their 20s, just stood around, waving knives and a gun, even asking people nearby to take pictures of them "as if they wanted to be on TV or something".
"They were oblivious to anything, they were more worried about having their photo taken, running up and down the road," he said.
"They had no intention of running off or leaving or anything.
"In my opinion, they were waiting for the police to arrive to be shot by the police. That's the only thing I can think.
"It's horrendous what they were doing to that guy."
Some "brave" women tried to shield the man on the ground from them, he added.
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