A man who was shot dead by police after he injured three people in a frenzied knife attack in south London on Sunday was released from prison about a week ago.

The knifeman, Sudesh Amman, was released after serving half of his three-year sentence for terrorism offences.

At the time of the attack, which police say was terrorism-related, he was under active police surveillance.

Amman was shot by officers at 2pm local time on Streatham High Road in the south-east of the capital. The area was full of people out shopping.

He was wearing a fake explosive vest, police said after officers blocked off the scene.

One of the victims is in hospital in a life-threatening condition, police said.

The second victim was treated for minor injuries at the scene before being taken to hospital and the third was also taken to the hospital but their conditions are not life-threatening, the force said.

#INCIDENT A man has been shot by armed officers in #Streatham. 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. Please follow @metpoliceuk for updates — Metropolitan Police (@metpoliceuk) February 2, 2020

A witness told the Press Association he saw a man carrying a machete and silver canisters being pursued by plainclothes police officers.

"The man was then shot," said Gulled Bulhan, 19, a student from Streatham. "I think I heard three gun shots but I can't quite remember.

"After that I ran into the library to get to safety. From the library I saw a load of ambulances and armed police officers arrive on the scene."

Lambeth Council will be providing services for those who witnessed today's horrific incident. I will update with the details — Bell Ribeiro-Addy MP (@BellRibeiroAddy) February 2, 2020

It is important that we do not allow acts of terror to divide us, as that is how terrorists win. My thoughts and prayers continue to go out to those injured and all who witnessed today's incident — Bell Ribeiro-Addy MP (@BellRibeiroAddy) February 2, 2020

British Prime Minister Boris Johnson has expressed his concern for those injured in the terror-related incident.

"Thank you to all emergency services responding to the incident in Streatham, which the police have now declared as terrorism-related," Mr Johnson wrote on Twitter.

"My thoughts are with the injured and all those affected."

He said the government would announce further plans for "fundamental changes to the system for dealing with those convicted of terrorism offences" on Monday.

Britain's Home Secretary, Priti Patel told Sky News: "Those measures will build on the actions we have already put in place very swiftly in terms of investing in count-terrorism police, overhauling the licensing condition and licensing regime around counter-terrorism offenders."

The city had another terror attack in November when a man stabbed two people to death in an attack on London Bridge, injuring another five. Like Amman, the attacker was released from jail early.

"We will also introduce legislation ending the early release of counter terrorism offenders," Ms Patel said.

"It’s right that these individuals are kept behind bars and we need to stop their release from prison."

Ms Patel and London Mayor Sadiq Khan said they were in close contact with the police over the incident.

"Terrorists seek to divide us and destroy our way of life," Mr Khan said. "Here in London we will never let them succeed."

The area's member of Parliament, Bell Ribeiro-Addy, has expressed her concern over the attack.

"Very concerned to hear about the incident on Streatham High St," Ms Ribeiro-Addy tweeted. "My thoughts are with those injured, their families and those who witnessed the attack.

"The police have declared this as terrorist-related. Please avoid the area while emergency services continue to do their work.

"The attack comes months after two were killed in an extremist attack on London Bridge."

Ms Ribeiro-Addy said that Lambeth Council would be providing psychological support to those who witnessed the assault.

The recent attacks have provoked memories of 2017 when London was the backdrop to five major terror incidents.

Britain remains at a “substantial” threat level, meaning a terror attack is likely.