CROWDS of people in central London fled for their lives as armed police swarmed Oxford Street after reports of gunfire.
The incident just before 5pm (4am AEDT) sent people running into the streets as British Transport Police rushed to evacuate the tube station.
Transport for London Tweeted that the station was closed while it investigated a "customer incident."
On-edge Londoners barricaded themselves in shops while police investigated the situation.
About an hour later, at 6.04pm local time (5:04 AEDT), police declared the incident over, saying it had "now been stood down.''
"Our response on #OxfordStreet has now been stood down. If you sought shelter in a building please now leave, and follow the direction of police officers on the ground if you need assistance," the force said on Twitter.
"Police were called at 16.38hrs … to a number of reports of shots fired on Oxford Street and underground at Oxford Circus tube station," Metrolpolitan Police initially said in a statement. "Police have responded as if the incident is terror-related. Armed and unarmed officers are on scene and dealing with colleagues from British Transport Police.
"If you are on Oxford Street go into a building and stay until further direction. Avoid travelling to the Oxford Street area," the statement said. "At this stage police have not located any casualties.''
The incident came as the Friday night peak-hour was building, and nearby Bond Street tube station was closed due to safety concerns with over-crowding.
As people fled along Regent Street, the famed Christmas light continued to shine overhead, and police could be seen inside the famous old Selfridge's department store, further down the street, which was being evacuated.
Several blocks around the Oxford Circus station were in lock-down, with London's iconic red double-decker buses stationary by the side of the road. A fleet of marked police cars and ambulances were also on the scene.
Forty minutes after the incident, police said they had not located any casualties.
Hannah Ritchie, an Australian living in London and originally from Sydney, told News Corp Australia she was forced to find shelter.
She was leaving her work about 4.40pm (3:40am AEDT) when she was caught up in the fleeing crowds.
"There was a huge volume of people and police everywhere," she said.
Ms Ritchie said she was used to seeing large crowds in the central London shopping district, but this was on another level.
"I couldn't move on the way to the station," she said. "As I crossed the road, people started screaming.
"I ran inside the Nike store and the doors were shut and locked behind us," she said. "When everyone ran into the store, that was terrifying.
"I'm not really an anxious person but I was quite scared ... I didn't know why everyone was screaming and running."
Inside the store, the crowd huddled together on the second floor, from which Ms Ritchie said she saw police clearing the street below with "very large guns".
About 20 minutes later, the crowd was asked to leave via the store's back exit. The evacuation sparked another panic.
"A few of us just started running," Ms Ritchie said. "I ran towards the BBC and waited behind the barricades."
Caroline Rigby, a reporter with BBC, reported hearing bangs and saw people running away.
"Gunshots on Oxford/Carnaby Street,'' she tweeted.
"Screaming and people falling over themselves.''
Oxford Circus underground station sits at the junction of Oxford and Regent streets, London's two most important and prestigious shopping streets.
Frightening video posted on social media showed people fleeing the scene and London's armed police squad was called to the station.
The UK has suffered four fatal terror attacks this year - at Westminster, Manchester, London Bridge and Finsbury Park - and authorities remain on a high state of readiness in case of further attacks.
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