A man has been shot and killed by police in south London after he wounded at least three people in “terrorist-related” stabbings.

“The circumstances are being assessed,” the Metropolitan Police force tweeted.

“The incident has been declared as terrorist-related.”

Police received reports of the stabbings around 2pm local time on Sunday.

One of the three stabbing victims is being treated for life-threatening injuries.

Witness Karker Tahir told Sky News undercover police officers chased a man down the neighbourhood’s main commercial street.

“They kept telling him ‘stop, stop’,” Tahir said.

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“But he didn’t stop, and then I saw that they shot him three times. It was horrible seeing it.

“The man was on the floor and it looked like he had something which police said may be a device.

“Police came to us and said ‘you have to leave the shop because he has a bomb in his bag’,” Tahir added.

Street pastor Richard Mustonen-Smith, 59, said he was in shock.

“I’ve been here all my life,” he said. “We’re always getting accidents down here, but not this.”

The attack took place a little over two months after two people were stabbed to death near London Bridge by a man who had recently been released from prison.

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He had been serving a 16-year sentence for plotting a terror attack.

British authorities on November 4 reduced the national terror threat level to “substantial”, meaning an attack is considered likely.

That is the third-highest level in the UK’s five-step alert system and marks the first time the threat level has been so low since August 2014.

Streatham MP Bell Reberio-Addy said police have assured her Sunday’s attack was an “isolated incident”.

British Prime Minister Boris Johnson praised emergency workers, while London Mayor Sadiq Khan urged community resolve in the face of another attack.

“Terrorists seek to divide us and to destroy our way of life,” he said.

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“Here in London we will never let them succeed.”

AAP