The man shot dead by police after he stabbed two people in London on Sunday left prison only days ago and had previously been noted by police as having a “fascination with dying in the name of terrorism”, it has emerged.

Sudesh Amman, whose attack on Streatham High Road left one person initially in a life-threatening condition, was under active police surveillance at the time of the attack. He had been freed after serving half of his sentence of more than three years for the possession and distribution of extremist material.

Jailed aged 18 in December 2018, Amman had been released after serving part of his three year and four month sentence, but was deemed sufficiently high risk that he was under special monitoring by police.

Facebook Twitter Pinterest Sudesh Amman was jailed for three years and four months and had only recently been released from prison. Photograph: Met police

Mobile phone footage of the incident showed officers wearing plain clothes arriving on the scene at high speed, firing about five gunshots and killing Amman outside a branch of the chemist Boots. They used pistols that are normally used by surveillance officers.

Amid questions over how Amman was able to carry out the attack so soon after his release when he was being monitored so closely, a Whitehall source said: “He was under surveillance, that is what allowed police to do their job so quickly. It could have been much worse than it was.

“There had been concerns when he was in prison but there were no powers for any authority to keep him behind bars.

The attack is the second terror incident in the British capital in the past three months, coming soon after former terrorist prisoner Usman Khan stabbed and killed two people in the London Bridge terror attack in late November.

Like Khan’s attack it will prompt further political debate about sentencing for terrorists. After an emergency meeting in Downing Street with Priti Patel, the home secretary, and senior police officers, Boris Johnson said: “[On Monday] we will announce further plans for fundamental changes to the system for dealing with those convicted of terrorism offences.”

Amman, 20, pledged allegiance to Islamic State in messages to his girlfriend at the time he was jailed, and said that he wanted to carry out terrorist attacks. At the time, he wrote to her: “If you can’t make a bomb because family, friends or spies are watching or suspecting you, take a knife, molotov, sound bombs or a car at night and attack …”

Comments from police officers at the time suggested that there were serious concerns about the level of Amman’s determination to die as a martyr. At the time of his conviction, Acting Commander Alexis Boon, then head of the Metropolitan police counter terrorism command, said he had a “fierce interest in violence and martyrdom”.

In remarks reported in 2018 Boon said: “His fascination with dying in the name of terrorism was clear in a notepad we recovered from his home. Amman had scrawled his ‘life goals’ in the notepad and top of the list, above family activities, was dying a martyr and going to ‘Jannah’ – the afterlife.”

Boon continued: “It’s not clear how Amman became radicalised but it is apparent from his messages that it had been at least a year in development. Whatever the circumstances, this case is a reminder of the need to be vigilant to signs of radicalisation and report it.”

A Whitehall source claimed that the attack was evidence that the prime minister should be able to enact harsher anti-terror laws. “There was nothing that could be done to keep him behind bars under existing laws, hence why he was under surveillance and strict licensing conditions,” the source said.

In another echo of Khan’s attack, Amman was wearing a fake suicide vest, described by some eyewitnesses as containing canister-like objects. Police said they were able to establish quickly it was a hoax device after the attacker had been shot.

Police and intelligence agencies only have resources to monitor a handful of individuals at one time, indicating that anybody under active surveillance will have been deemed to be a serious threat.

Play Video 1:30 Streatham attack: police shoot man dead after 'terror related' stabbing – video report

Investigators’ inquiries will now focus on Amman’s associations, whether he was a lone actor or was directed by others, and, if they were being monitored, how the attacker managed to launch a stabbing spree in broad daylight. Investigators cautioned that it remained very difficult to establish exactly when a suspect’s intention turned into violent action.

Eyewitnesses said they saw police fire several shots at the attacker. Karker Tahir, who worked in a nearby shop, said he saw “two or three police officers undercover with guns” telling the suspect to stop. “Then I saw them shoot him three times,” he added.

Nardos Mulugeta, 52, a mechanical engineer who lives in Streatham, said he heard one shot, then a gap before three or four shots were fired. He described seeing three victims in the street including a woman who said she had been “stabbed in the back”.

Two people were attacked on the high street, with police describing a man’s injuries as “life threatening” at the time. In total, three people were taken to south London hospitals, the Met later confirmed. One man’s condition is no longer life-threatening after treatment, a Met statement said; one woman with minor injuries has been discharged; and another woman is still being treated for minor injuries that police said were believed to have been caused by glass following the discharge of one of the officers’ firearms.

Police cordoned off the scene, closing down what is normally a busy shopping street and thoroughfare, with shoppers held back as paramedics attended. SThe incident happened so quickly that a double-decker bus that was driving past remained abandoned in the road as forensics investigators worked into the night.

An immediate investigation into the shooting is also being undertaken by the Independent Office for Police Conduct. The watchdog said: “It is mandatory for us to conduct an independent investigation when the police fatally shoot a member of the public.”

Additional reporting: Sarah Marsh