Neighbours were woken up by screaming and shouting before a man in his 30s who was reportedly armed with a crossbow was shot by police.
The Metropolitan Police said the man was trying to force his way into a building in Bywater Place, Surrey Quays, just before 5am on Tuesday and was threatening to hurt the people inside.
Unarmed officers tried to speak to him but were threatened, and when police marksmen arrived he had got into the building and was shot.
He was given first aid but died at the scene, and police are trying to contact his family.
Restaurant owner Akber Baloch, 52, said: “I was sleeping and I heard some shouting. It was also like someone was banging a door. There was banging and shouting. It sounded like a man and a woman.”
He added: “I was afraid about what was happening “I am really worried and it makes you feel insecure. I do not know who is wrong or right in this situation but it makes you feel insecure."
IT consultant Valeria Bocanegra, 37, said: “I could hear shouting but could not hear what was being said. I could hear someone screaming and then everything became quiet.
“I think it was a man and a woman fighting.
“It is quite a shock (to hear that someone has been shot). There is a family behind this situation. A man has died and it is a horrible situation."
Another neighbour, who did not want to be named, said the noises made her dog bark and woke her up She said: “It sounded to me like someone was trying to get in or maybe banging furniture.
The woman said: “The dog was barking. There was a lot of shouting. There were lots of voices.
“You can see this sort of stuff on TV but when you see it is real and it is real people’s lives – it is just really sad.
“It is going to be really traumatic for the people who were inside.”
Two people in the building suffered minor injuries.
Forensics officers could be seen working next to a white tent which had been set up behind a police cordon on Tuesday.
Police tape, guarded by uniformed officers, blocked the winding roads around the scene which is surrounded by residential flats and terraced houses.
Watchdog the Independent Office for Police Conduct (IOPC) has launched an investigation, as is standard when there is a fatal police shooting.
Detective Chief Superintendent Seb Adjei-Addoh, responsible for policing Southwark, said: “My thoughts are with all those affected by this incident.
“I understand the local community will be concerned at the events that have taken place this morning. We will fully support the IOPC investigation into the full circumstances of what happened.”
An IOPC spokesman said: “We have begun an independent investigation into the circumstances surrounding the fatal shooting of a man by the Metropolitan Police Service (MPS) earlier this morning in Southwark.
“We were notified by the MPS after the incident, which occurred shortly before 5am, and declared an independent investigation at around 6.40am.
“We have sent investigators to the scene and the police post-incident procedure to begin gathering evidence “Our investigation is in its very early stages.”
Fatal police shootings are relatively rare in the UK – there were only three in the year to March 31 2023.
The most recent Met fatality was the death of Giedrius Vasiljevas, 40, who was shot at his home in Dagenham, east London, in November after calling 999 to say he had loaded guns and wanted to take his own life.
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