A man shot dead by police after he stabbed people in south London had been released from prison in January.
Sudesh Amman was released around a week ago after serving half of his three year sentence for terror offences.
He was under active police surveillance at the time of the attack on Streatham High Road, which police believe to be an Islamist-related terrorist incident.
Three people were injured, with one person in a life-threatening condition.
Prime Minister Boris Johnson said the government would announce further plans for fundamental changes to the system for dealing with those convicted of terrorism offences on Monday.
He said the government had moved quickly to introduce measures strengthening its response to terrorism, including longer prison sentences and more money for police, following the attack at Fishmongers Hall, near London Bridge, in December.
Gunshots were heard on Streatham High Road just after 14:00 GMT on Sunday.
Reports suggest Amman entered a shop and started stabbing people. It appears he then left the shop and stabbed a woman.
Witnesses reported hearing three gun shots and seeing a man lying on the ground outside a Boots pharmacy, as armed police approached and shouted at those nearby to move back.
He had a hoax device strapped to his body, police said.
The BBC’s Daniel Sandford said the events appeared to unfold after witnesses saw an unmarked police car pull in front of another car near Streatham Common, forcing it to stop.
He said this could be linked to the subsequent stabbings and police shooting and it was possible somebody was stopped, before being followed by undercover officers.
London Ambulance Service said it treated the three people for injuries at the scene and all were taken to hospital.
Of the other two, one had minor injuries, believed to have been caused by glass following shots from the police firearm, and the third person’s condition was not life-threatening.
In a statement, Deputy Assistant Commissioner Lucy D’Orsi said armed officers were in immediate attendance and shot a male suspect, as part of a proactive Counter Terrorism operation.
The situation has been contained and officers from the Met’s Counter Terrorism Command are now leading an investigation into the incident, she said.