UK Prime Minister David Cameron has called a meeting of his government's emergency Cobra security committee after the killing of a man in London.
Britain's government convenes Cobra meetings only to deal with incidents that have implications for national security.
Cameron said that there were "strong indications" that a killing in London was terror-related. "It is the most appalling crime," Cameron said, before cutting short a visit to Paris.
"The police are urgently seeking the full facts about this case but there are strong indications that it is a terrorist incident."
Media reports said a British soldier was killed in the incident in the Woolwich district in the south-east of the British capital.
WARNING: Video contains graphic images
Two attackers with knives killed a man on Wednesday on the streets of London, witnesses said. They described the weapons as machetes or meat cleavers. Onlookers described the man as being "beheaded".
The Express reported that a Whitehall source claimed the men were heard to shout "Allah Akbar" as they attacked the victim in broad daylight.
Police responded, shooting and injuring the two attackers in the south-eastern district of Woolwich, Metropolitan Police commander Simon Letchford said.
"The prime minister says the killing in Woolwich is truly shocking and he has asked the home secretary [internal affairs minister] to chair a Cobra meeting," his office told Reuters.
"A number of weapons were reportedly being used in the attack, and this included reports of a firearm," police said in a statement.
Security was tightened in the area immediately after the incident. Helicopters hovered above and nearby roads were sealed off by the police.
Earlier, a teacher at a local school told the BBC he saw a body on the road and afterwards heard gunshots.
Photographs posted on social media showed at least two people on the ground who appeared to be injured, but no further details were immediately available. – Additional reporting by Reuters, Sapa-dpa