There was a major security alert at the Palace of Westminster after a man apparently carrying a knife charged through the gates into the front yard of the parliamentary compound.
Amid shouts and screams, sounds similar to gunfire rang out.
Two people were seen to be lying within Old Palace Yard, immediately outside Westminster Hall.
The sitting in the House of Commons was suspended while police officers sealed off the area around the incident.
Immediately before the incident, at around 2.45pm, a crowd of passers-by was seen running from the direction of Westminster Bridge and around the corner into Parliament Square.
Staff inside Parliament were told to stay inside their offices.
Minutes after the incident, an emergency services helicopter landed in Parliament Square, as sirens were heard outside.
Air ambulance medics came from the helicopter to assist the casualties.
Two people lay on the ground in the yard. One of them appeared to have had clothes removed as emergency workers attempted to resuscitate the pair.
Parliament Square was closed to traffic.
An ambulance entered the gates to New Palace Yard.
Witness Don Brind told the Press Association he heard shots being fired and saw two people apparently injured on the ground.
Mr Brind, a researcher for MPs, said: "I heard some shouting and saw some running out of the corner of my eye and then a short time after that there was a shot. I looked and I saw a civilian on the ground, with somebody standing over him with what I assumed to be a gun.
"Then I looked and about 10 yards away, there was a yellow jacketed person on the ground, who appeared to be alive and talking."
He said he assumed the person in the high-visibility jacket was a police officer.
Pictures emerged of a car having crashed into the railings of Parliament at the end of Westminster Bridge
Press Association reporter Laura Harding, who was in Westminster at the time of the incident, said: "Everyone has been evacuated into Central Lobby, including a group of schoolchildren and kitchen staff.
"Around 15 schoolchildren aged around 10, with armed police coming through the lobby now.
"The children are really calm, the teachers are comforting them.
"Everyone is standing around on their phones.
"There are also a bunch of young people from the Hammersmith Boxing Club in their tracksuits and the British Lionhearts boxing group."
Dennis Burns, who was just entering Parliament for a meeting when the security alert happened, told the Press Association: "As I was coming through the doors at Portcullis House, a policeman grabbed someone who was coming in and threw him out.
"As we were coming though the glass doors I was told by one security guard to get out while another one told me to get in.
"As I walked in I heard a security guard get a radio message saying 'a policeman has been stabbed'.
"Then I walked in as police officers and security start rushing out of the front doors on to the street.
"When I got inside I was wondering what the hell was going on and I saw dozens of panicked people running down the street. The first stream was around 30 people and the second stream was 70 people.
"It looked like they were running for their lives."
The Met Police has tweeted: "We were called at approx 2.40pm to reports of an incident at #Westminster Bridge. Being treated as a firearms incident - police on scene".
Commons Leader David Lidington told MPs: "What I am able to say to the House is there has been a serious incident within the estate.
"It seems that a police officer has been stabbed, that the alleged assailant was shot by armed police.
"An air ambulance is currently attending the scene to remove the casualties.
"There are also reports of further violent incidents in the vicinity of the Palace of Westminster but I hope colleagues on all sides will appreciate that it'd be wrong of me to go into further details until we have confirmation from the police and from the House security authorities about what is going on."
After the incident, Radoslaw Sikorski posted a video to Twitter purporting to show people lying injured in the road on Westminster Bridge.
Mr Sikorski, a senior fellow at Harvard's Centre for European Studies, wrote: "A car on Westminster Bridge has just mowed down at least 5 people."
A woman at the scene was on the opposite side of the square when she heard shots ring out at about 2.45pm.
She said: "We literally just heard shots and then saw people running, and we went to have a look."
The woman, from South Africa and living in Ireland, said she and two friends went towards the palace gates and saw a man lying on the floor inside.
She said: "I saw a body, they were working on the floor. They were just inside the gates.
"He had one gunshot wound to the right side of his chest. I don't know if he was dead or alive, but people were working on him.
"I saw that needed medical attention and I asked if I could help because I am a doctor, but they said they were fine.
"Then the police moved us back."
Prime Minister Theresa May was seen being ushered into a silver Jaguar car as what sounded like gunfire rang out at Parliament during the incident.