The police force said they had received reports that shots had been fired on Oxford Street and in the nearby underground station, which they were responding to as if it might be terrorist-related.
They later said there was no evidence that shots were fired, or that there were any casualties. The station has since been reopened.
"Police were called at 16:38 hrs ... to a number of reports of shots fired on Oxford Street and underground at Oxford Circus tube station," the Metropolitan Police said in a statement.
"Police have responded as if the incident is terrorist related. Armed and unarmed officers are on scene" the police added.
The police have not yet located any suspects.
"If you are on Oxford Street go into a building. Officers are on scene and dealing," London's Metropolitan Police said on Twitter.
The Reuters witness said Oxford Street had been packed with shoppers taking advantage of the Black Friday sales. The witness said the area had been cleared of people and traffic and fire engines and police were rushing to the scene.
"Oxford Circus Station is closed while we investigate a customer incident," said the capital's transport operator, Transport for London, adding trains were not stopping at the station due to the incident.
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