The City Cruises ferry smashed into the bridge at around 4pm in front of the Houses of Parliament as terrified tourists 'screamed' in shock.
Emergency services were called to the scene of the collision to help the vessel's recovery.
It is thought no one was injured.
Westminster Bridge has remained closed since the incident.
Footage taken from the bridge shows the City Cruises boat named Millennium of Peace wedged underneath the bridge.
One witness to the smash tweeted: "Just witnessed the top of this ferry get crushed and now stuck.
"Westminster Bridge, crazy seeing the people scream and getting stuck under the bridge."
Another wrote: "Westminster Bridge damaged by a City Cruises boat which got stuck earlier and now closed to trraffic."
A Metropolitan Police spokesperson said: "Westminster Bridge is temporarily closed after a boat was involved in a collision with the bottom of the bridge.
"London Fire and the local authority are in attendance.
"No injuries. Thanks for your patience.
"This incident is not terror related."
Matthew Beckwith, Director of City Cruises, said the crash was caused by a "mechanical failure".
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