The dead officer has been named as PC Keith Palmer, 48, a husband and father.
PM Theresa May said the attack was "sick and depraved" and struck at values of liberty, democracy and freedom of speech.
The attacker has not been named by police.
Acting Deputy Commissioner and head of counter terrorism at the Metropolitan Police, Mark Rowley, said they think they know who he is and that he was inspired by international and Islamist-related terrorism, but gave no further details.
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22/03/2017
22:14
Four people, including a police officer and a man believed to be the attacker, have died in a terrorist incident near the UK's Houses of Parliament, Scotland Yard has said.
A woman was among several pedestrians struck by a car on Westminster bridge, before it crashed into railings.
An officer was stabbed in the Houses of Parliament by an attacker, who was shot by police.
At least 20 people were injured, including three other officers.
Prime Minister Theresa May is to chair a meeting of the government's emergency Cobra committee later.
***
20:33
One woman has died after a terror incident that saw a police officer stabbed and as many as a dozen people reportedly run over outside London's Parliament building on Wednesday.
A junior doctor at St. Thomas' Hospital said there were “catastrophic” injuries in the incident on Westminster Bridge, the British news agency Press Association reported.
An alleged assailant was also shot by police after stabbing the officer. It is unclear if there were others involved in the attack.
London police were called to the Parliament building after reports of gunfire and a vehicle crashing into a crowd at Westminster Bridge near Britain's parliament. Its not clear exactly what happened or how many people were injured.
On Twitter, London police said they are treating the attack "as terrorist incident until we know otherwise."
The former Polish foreign minister Radoslaw Sikorski posted a video on Twitter that seems to show people lying injured in the road on Westminster Bridge.
Sikorski, a senior fellow at the Harvard Centre for European Studies, says he saw at least five people lying on the ground after being "mown down" by a car.
Sikorski told the BBC he "heard what I thought what I thought was just a collision and then I looked through the window of the taxi and someone down, obviously in great distress.
"Then I saw a second person down, and I started filming, then I saw three more people down, one of them bleeding profusely."
A woman on a bus crossing the bridge at the time of the incident told Sky News, "I saw a car go out of control and go into pedestrians on the bridge ... We saw people lying on the floor, injured obviously. I saw 10 people maybe."
Police said they were called to Westminster at around 10:40 a.m.
The leader of the House of Commons said a man had been shot by police. David Liddington also said there were "reports of further violent incidents in the vicinity."
Reports of shots outside #UK Parliament. Remain vigilant , exercise caution, and monitor local news for updates.
Lidington said the Parliament complex is in lockdown.
White House press secretary Sean Spicer said on Twitter that President Trump had been briefed on the ongoing situation.
Trump himself said during a brief appearance Wednesday before reporters at the White House that he was just getting the news. He called it "big news."
The U.S. State Department says it is closely monitoring the incident and urged Americans in London to avoid the area.
Spokesman Mark Toner said Wednesday: "We stand ready to assist in any way the U.K. authorities would find helpful."
He added that the U.S. Embassy in London is closely following the news and stands ready to help any affected Americans.
He said: "Our hearts go out to those affected."
BBC News reports police believe there is a suspect vehicle outside parliament, people being evacuated from the area.
Witnesses on scene said about a dozen people were injured on the Westminster Bridge. Another witness told Sky News that there was an "almighty crash" as a vehicle hit the railings outside Parliament.
A witness told Sky News: "Someone rushed through, attacked a policeman... he appeared to be carrying a knife. We heard lots of gunfire."
Witness Jayne Wilkinson told the Telegraph: "We were taking photos of Big Ben and we saw all the people running towards us, and then there was an Asian guy in about his 40s carrying a knife about seven or eight inches long."
Commons speaker John Bercow suspended the session as police responded to an incident.
Prime Minister Theresa May is safe, a spokesperson told reporters.
George Eaton, a journalist with the New Statesman, said that from the window of Parliament's Press Gallery, he saw police shoot a man who charged at officers.
"A large crowd was seen fleeing the man before he entered the parliamentary estate," he wrote on the publication's website. "After several officers evaded him he was swiftly shot by armed police."
The incident Wednesday comes on the one-year anniversary of the terror attacks in Brussels in which 32 people were killed and more than 300 injured. ISIS claimed responsibility for the coordinated suicide bombings -- two at the Brussels Airport in Zaventem and one at Maalbeek metro station in central Brussels. The bombings were the deadliest terror attack in Belgium's history.
ISIS has long promoted the use of vehicles and knives in attacks by so-called "lone wolf" terrorists, particularly in Western countries. The terrorist group has not claimed responsibility for Wednesday's attack.
/AP/
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