A man with bloodied hands swore to "never stop fighting" in the aftermath of the Woolwich killing.
Footage obtained by ITV news showed the man carrying knives, speaking into a camera.
It shows the suspect, wearing a dark jacket, jeans and a beanie hat, calmly walking towards the camera with what appears to be two large knives clasped by the handles in his bloodied left hand.
Gesticulating with both hands - while gripping the weapons - the man points to his own face as he says: "We must fight them as they fight us. An eye for an eye, a tooth for a tooth."
Over his shoulder, a group of onlookers can be seen just a few steps from the victim.
Traffic, including an articulated lorry, has stopped on the carriageway, metres from the figure lying in the road.
The suspect, speaking clear English with a London accent, appears to try to justify the attack, saying: "I apologise that women have had to witness this today, but in our land our women have to see the same.
"You people will never be safe. Remove your government, they don't care about you."
As people stand aghast at the terrifying scene unfolding in front of them, one woman is seen pulling her shopping trolley along behind her, seemingly oblivious to the horror.
As the man finishes addressing a few members of the public, he turns back towards the victim lying on his side in the road. He then talks to a second man.
Speaking in Paris, Prime Minister David Cameron condemned the "appalling murder" and "sickening crime".
"We have had these sorts of attacks before," he said.
"We will never buckle in the face of them."
The Prime Minister said there were "strong indications" that it was a terrorist incident, and confirmed his return to London.
Earlier, Home Secretary Theresa May summoned the government's crisis committee after the gruesome death of the man in South East London.
Police are treating the attack, in Woolwich, as a terrorist incident, it was reported.
The local MP, Nick Raynsford, said the dead man was a soldier from Woolwich Barracks. Witnesses said he wearing a Help for Heroes t-shirt.
According to senior Whitehall sources quoted by the BBC's political editor, Nick Robinson, the attackers tried to film the attack whilst chanting "Allahu Akbar" - God is Great.
The Cabinet Office Briefing Rooms committee, known as Cobra, will bring together Cabinet ministers, security chiefs and government officials to discuss what happened.
Cameron, at a European Council meeting in Brussels, described the attack as "truly shocking".
Mayor Boris Johnson said the attack was "a sickening deluded and unforgivable act of violence."
He added: "My thoughts are with the victim and his family."
One man was confirmed dead at the scene and two other men were taken to hospital, one of them in a serious condition, a London Ambulance Service spokeswoman said.
Pictures published on Twitter show what appears to be three bodies lying in the street just yards from the Royal Artillery Barracks. Unconfirmed reports suggest the victim may have been a serving soldier.
Other images show a red air ambulance landing in the street. Local newspaper The News Shopper is blogging about the incident and has reported eyewitnesses describing shots also being fired.