At 07:37 BST a silver Ford Fiesta hatchback crashed into barriers outside Parliament in central London.
Three people were injured and the driver of the car was detained by officers at the scene.
Eyewitnesses have said the car appeared to deliberately hit members of the public.
Who is the suspect?
A 29-year-old man has been arrested on suspicion of terror offences and is being held at a south London police station.
He was subsequently also arrested for attempted murder.
He has been named by government sources as Salih Khater, a British citizen originally from Sudan.
Police have been searching three addresses in Birmingham and Nottingham as part of their investigation.
Labour's Roger Godsiff, MP for Birmingham Hall Green, tweeted that the driver was "believed to have been living in my constituency".
The suspect is not believed to have been known to MI5 or counter-terrorism police, but is understood to have been known to local police.
He did not co-operate with officers after his arrest, Scotland Yard said.
There was nobody else in the vehicle and no weapons have so far been found.
Is anybody hurt?
A man and a woman were treated in hospital for serious injuries but have since been discharged.
A third patient was treated for minor injuries at the scene.
Where did it happen?
The crash occurred in central London outside the Palace of Westminster. Parliament is not currently sitting.
An eyewitness said the vehicle was travelling westbound when it swerved into eastbound traffic.
What action have the police taken?
Police are treating the situation as a terrorist incident and the Met's Counter-Terrorism Command is leading the investigation.
More than 10 police vehicles and at least three ambulances were at the scene outside Parliament - where firearms officers and police sniffer dogs searched the area.
Officers have concluded searches of two properties in Birmingham and one in Nottingham, and are currently searching a third address in Birmingham.
Police have released more details about the car's movements before the crash:
- The car travelled from Birmingham to London on Monday night, arriving in the capital just after midnight
- The vehicle was in the Tottenham Court Road area from approximately 01:25 BST until 05:55. It was then driven around the Westminster and Whitehall area from approximately 06:00 until the incident
Scotland Yard's head of counter terrorism Assistant Commissioner Neil Basu said there was "no intelligence at this time of further danger" to London or the UK as a whole connected to this incident.
What did witnesses see?
Barry Williams, a BBC staff member based at Millbank, said the car drove onto the wrong side of the road and "ploughed" into cyclists waiting at the lights.
"Then it swerved back across the road and accelerated as fast as possible, and hit the barrier at full pelt," he said.
Jason Williams told the BBC Radio 4 Today programme the driver had "driven at speed - more than 40 mph".
He said: "I saw at least 10 people lying down. I was told basically to move away, to run."
"It looked deliberate... it didn't look like an accident," he added.
Ewalina Ochab, who also saw the crash, said: "It looked intentional - the car drove at speed and towards the barriers."
She said: "I was walking on the other side of the road. I heard some noise and someone screamed. I turned around and I saw a silver car driving very fast close to the railings, maybe even on the pavement."
The vehicle did not appear to have a front registration plate when it crashed, she added.
How have politicians responded?
The government held a meeting of its Cobra emergency committee on Tuesday afternoon.
The prime minister paid tribute to the "formidable courage" and professionalism of the emergency services who "ran towards a dangerous situation in order to protect the public".
Urging the public to remain vigilant but "carry on as normal", Theresa May added: "For the second time in as many years the home of our democracy, which is a potent symbol of our precious values of tolerance and freedom, has witnessed terrible scenes just yards from its door."
Mayor of London Sadiq Khan thanked those who responded first at the scene and said he was in close contact with the Met Police.
Labour leader Jeremy Corbyn said his thoughts were with those hurt. Praising the emergency services, he said: "Their bravery keeps us safe day in, day out."
US President Donald Trump tweeted: "Another terrorist attack in London... These animals are crazy and must be dealt with through toughness and strength!"
What happens next?
BBC News home affairs correspondent June Kelly said: "The police will be looking at this man's background, his identity.
"They will be looking at his beliefs, his associates, also his mental state."
Security correspondent for the BBC Frank Gardner added: "We live in a digital age, there are no secrets.
"It'll be out pretty soon what he's been up to, who he's been communicating with, where he's been going, what he's been doing, what he had for breakfast, frankly."