The man and an accomplice repeatedly stabbed an off-duty soldier and tried to behead him in front of thousands of passers-by. The men reportedly shouted "Allah Akbar" (Arabic for ‘God is Great') and then asked witnesses to film them as they ranted over the dead.
The two black men, in their 20s, calmly waited for the armed police to arrive before charging at them with weapons in their hands.
The incident occurred outside the army barracks in southern London and the police later shot two suspects who were taken to a local hospital.
Prime Minister David Cameron called an emergency meeting in the wake of the ghastly incident and said the country would not buckle in face of such attacks.
The UK has hugely revamped its anti-terror efforts since the July 7, 2005, terror attacks.