At least 29 people were injured in the incident at Parsons Green station, in the capital's southwest. Officials have declared it a terrorist attack using an "improvised explosive device."
Britain raised its threat level to maximum on Friday and announced troops would be deployed to key sites after a bomb detonated on a packed London Underground train, injuring at least 29 people in an attack claimed by Daesh.
Twelve hours after the blast at Parsons Green station in southwest London, Prime Minister Theresa May announced the national threat level would be raised to "critical", meaning another attack may be imminent.
She said military personnel would take over guard duty at certain closed "protected sites", freeing up 1,000 police officers to be deployed on the transport network and on streets across Britain.
The country was last on critical alert after the bombing at a concert in Manchester in May, which was also claimed by Daesh.
TRT World's Sarah Morice has more from London.
The London Ambulance Service said none of the 29 victims treated in hospital were in a serious life-threatening condition, and eight have since been released.
Britain's top counter-terrorism officer Mark Rowley said the incident was caused by the detonation of an improvised explosive device.
Rowley said the investigation into the attack was making "really good progress".
"We're chasing down suspects," he told reporters.
In his statement, Rowley also appealed for images and videos.
"Deputy Assistant Commissioner Neil Basu, the senior national coordinator for CT policing, has declared it a terrorist incident," the Metropolitan Police said in a statement.
Sky news, citing unnamed sources, reported that the device did not fully explode.
London's Metro newspaper initially reported that the blast left some passengers with facial burns.
"It is too early to confirm the cause of the fire, which will be subject to the investigation that is now underway by the Met's Counter Terrorism Command," London police said in a statement.
London Mayor Sadiq Khan told LBC radio that Londoners will see more police on the streets of the British capital.
Prime Minister May was also quick to condemn the attack.
"My thoughts are with those injured at Parsons Green and the emergency services who, once again, are responding swiftly and bravely to a suspected terrorist incident," May said in a statement.
Government calls for calm
"Everybody should keep calm and go about their lives in as normal a way as they possibly can," Foreign Secretary Boris Johnson told BBC TV.
Britain has suffered four attacks blamed on terrorists so far this year which killed 36 people, all claimed by Daesh.
British security services believe those behind some of the incidents had probably been acting alone and likely radicalised by online material.
In March, a man drove a car into pedestrians on London's Westminster Bridge killing four, before he stabbed a policeman to death outside parliament.
A further 22 people were killed in a suicide bombing at a pop concert in Manchester in May and the following month three militants drove into pedestrians on London Bridge before stabbing people at nearby restaurants and bars, killing eight.
Witnesses report people fleeing the station
Outside the station, a woman was sitting on a pavement with a bandage around her leg while armed police patrolled. A woman was seen being carried off on a stretcher with her legs covered in a foil blanket.
The Sun reported that people fled the scene in panic after the reported blast.
Transport for London said on Twitter that there was no service between Earls Court and Wimbledon on the District Line which runs through Parsons Green.
No service Earls Court to Wimbledon. London Buses, South Western and London Overground accepting tickets via any reasonable route.— TfL Travel Alerts (@TfLTravelAlerts) September 15, 2017
"Another attack in London by a loser terrorist," US President Donald Trump said on Twitter. "These are sick and demented people who were in the sights of Scotland Yard. Must be proactive!"
May, who returned to London to chair a meeting of Britain's emergency response committee, said police and security services were working to track down those responsible.
Another attack in London by a loser terrorist.These are sick and demented people who were in the sights of Scotland Yard. Must be proactive!— Donald J. Trump (@realDonaldTrump) September 15, 2017
Asked about Trump's tweet, she replied: "I never think it's helpful for anybody to speculate on what is an ongoing investigation."
Others were more directly critical of Trump. "True or not - and I'm sure he doesn't know - this is so unhelpful from leader of our ally and intelligence partner," May's former chief of staff Nick Timothy said on Twitter.