A man believed to be a British soldier was brutally murdered by suspected Islamists near a London barracks on Wednesday in an attack Prime Minister David Cameron said appeared to be terror-related.

Cameron called the attack "appalling", and said: "There are strong indications that it is a terrorist incident."

Eyewitnesses described how two men attacked a man in the street in broad daylight with knives and a gun and then remained at the scene, asking passers-by to photograph and film them.

Armed police shot and wounded the two attackers after being called to the incident by bystanders.

Footage emerged showing one of the men carrying a blood-covered knife and meat cleaver and saying to the camera: "We swear by almighty Allah we will never stop fighting you."

The man, a black man dressed in a hooded jacket and black woolly hat, made a number of political statements.

"We must fight them as they fight us. An eye for an eye, a tooth for a tooth," he says, speaking in a London accent.

He adds: "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."

Reports said the man attacked was wearing a t-shirt bearing the logo of the British military charity Help for Heroes.

One eyewitness, identified only as James, told local radio station LBC the two assailants "were hacking at this poor guy".

"We thought they were trying to remove organs or something.

"These two guys were crazy, they just were not there, they were just animals."

The government's emergency response committee, COBRA, met hours after the attack, which took place in broad daylight near the Royal Artillery Barracks in Woolwich, southeast London.

Security was reinforced at all army barracks in London following the incident.

Cameron, who returned early from talks with French President Francois Hollande in Paris, called the attack "truly shocking".

Hollande said at a press conference with Cameron that the victim was a soldier, but the British prime minister gave no confirmation.

Cameron said: "We've had this sort of attack before in our country and we never buckle in the face of them.

"People across Britain, people in every community, I believe, will utterly condemn this attack."

A local member of parliament, Nick Raynsford, said he believed the dead man was a soldier.

Home Secretary Theresa May said: "It has been confirmed to me that a man has been brutally murdered this afternoon in southeast London.

"Two other men were shot by armed police and they are currently receiving treatment for their injuries. This is a sickening and barbaric attack."

The Muslim Council of Britain said the killers' use of "Islamic slogans" indicated they were motivated by their faith.

A statement from the council said: "This is a truly barbaric act that has no basis in Islam and we condemn this unreservedly. Our thoughts are with the victim and his family."

Police were called at 2:20 pm (1320 GMT) to reports of one man being assaulted by two others.

"A number of weapons were reportedly being used in the attack, and this included reports of a firearm," said police commander Simon Letchford.

Local officers, then firearms police officers arrived on the scene where they found a man who was later pronounced dead.

"Two men, who we believe from early reports to have been carrying weapons, were shot by police. They were taken to separate London hospitals, they are receiving treatment for their injuries," Letchford said.

He said there would be a heightened police presence in the area and urged locals to remain calm.

A white and blue police evidence tent was visible in the street and police tape sealed off the scene which was being scoured by officers in forensic suits.

Eyewitness pictures showed an air ambulance landing in the road and three bodies lying on the ground with dozens of onlookers observing the scene after the police arrived.

A Buckingham Palace spokesman said Queen Elizabeth II -- who is due to visit the barracks later this month -- was "concerned" by the attack and was being kept updated.

In Washington, the State Department issued a statement condemning the attack.

"We stand with our UK allies in the face of such senseless violence. Our thoughts and condolence are with the family of the victim and the British people," State Department spokesman Patrick Ventrell said.