Police shut down Leytonstone station in East London at around 7:15pm last night, after a man shouting 'This is for Syria' slashed one man's throat and injured two others.
The attack caused chaos at the station, with commuters seen running from the scene of the attack as the lone man brandished a three inch blade.
Describing the incident, witness Michael Garcia told the BBC he was walking through an underpass connected to the station when he saw people running in panic.
"I realised it wasn't a fight but something more sinister," he said.
"I saw a guy, an adult, lying on the floor with a guy standing next to him brandishing a knife of about three inches... maybe a hobby knife.
"It had a thin blade, but looked fairly long.
"He was screaming 'go on, then, run' to everyone else. He was pacing back and forth next to the guy on the floor. He came up to the barriers."
In the video, which has since gone viral, a bystander can be heard screaming: 'Drop it you fool! You're no Muslim, you ain't no Muslim', his words later sparking a Twitter trend.
Commander Richard Walton, who leads the Met's Counter-Terrorism Command, said: "We are treating this as a terrorist incident. I would urge the public to remain calm, but alert and vigilant.
"The threat from terrorism remains at severe, which means that a terrorist attack is highly likely.
"I would appeal to anyone who was in the vicinity of Leytonstone underground station earlier this evening at around 7pm who saw anything suspicious to call the anti-terror hotline on 0800 789 321.
"Anyone who may have captured video or photographic footage of the incident is also urged to make contact with the Counter-Terrorism Command via the Anti Terror hotline".
A spokeswoman for 10 Downing Street said: "There is an ongoing police investigation into the attack in London. We are monitoring the situation closely as further details emerge."
The most seriously hurt victim's injuries are not said to be life-threatening and he is recovering in hospital.