A man shot dead by police after he stabbed people in south London had been released from prison in January.
Sudesh Amman, 20, was released around a week ago after serving half of his sentence of three years and four months for terror offences.
He was under active police surveillance at the time of the attack on Streatham High Road, which police believe to be an Islamist-related terrorist incident.
Three people were injured but none are in a life-threatening condition.
Scotland Yard said officers were searching addresses in south London and Bishop’s Stortford, Hertfordshire.
“No arrests have been made and enquiries continue at pace,” the Metropolitan Police said.
Prime Minister Boris Johnson said the government would announce further plans for “fundamental changes to the system for dealing with those convicted of terrorism offences” on Monday.
He said the government had moved quickly to introduce measures strengthening its response to terrorism, including longer prison sentences and more money for police, following the attack at Fishmongers Hall, near London Bridge, in November
At the time of Amman’s release there were concerns about the danger he might pose to the public but there were no legal mechanisms to keep him in prison, BBC political correspondent Chris Mason said.
Given November’s attack also involved a convicted terrorist released mid-way through his sentence, our correspondent said there is “a desperate desire” within government to be seen to be acting quickly.
Gunshots were heard on Streatham High Road just after 14:00 GMT on Sunday.
Reports suggest Amman entered a shop and started stabbing people. It appears he then left the shop and stabbed a woman.
Witnesses reported hearing three gunshots and seeing a man lying on the ground outside a Boots pharmacy, as armed police approached and shouted at those nearby to move back.
The Met Police said armed officers – who were part of a “proactive counter-terrorism operation” following the suspect on foot – were in “immediate attendance”.
The man had a hoax device strapped to his body, police said.
The BBC’s Daniel Sandford said the events appeared to unfold after witnesses saw an unmarked police car pull in front of another car near Streatham Common, forcing it to stop.
London Ambulance Service said it treated the three people for injuries at the scene and all were taken to hospital.
A man in his 40s was initially considered to be in a life-threatening condition but this is no longer the case.
A woman in her 50s whose injuries were not life-threatening has been discharged from hospital.
Another woman in her 20s continues to receive hospital treatment for minor injuries, believed to have been caused by glass following shots from the police.
Officers from the Met’s Counter Terrorism Command are leading an investigation into the incident.
Streatham High Road remains closed and a cordon is in place, with enhanced police patrols in the area.