The London Ambulance issued an official statement on twitter, following the incident.
Armed police swarmed to the area which was quickly sealed off to the public.
A staff member in parliament, who did not want to be named, told AFP: "I definitely heard shots. I saw someone in dark clothing go down."
Officers - including firearms officers - are on scene and dealing with the incident in #Westminster- Metropolitan Police (@metpoliceuk) March 22, 2017
Westminster station on the London Underground train network, which is opposite the Houses of Parliament, was closed over to the incident.
British police said a security incident outside parliament on Wednesday which saw a police officer stabbed and his assailant shot was being treated as "terrorist".
"We are treating this as a terrorist incident until we know otherwise," police said in a statement.
Incident in #Westminster: We are treating this as a terrorist incident until we know otherwise- Metropolitan Police (@metpoliceuk) March 22, 2017
A policeman was stabbed inside the perimeter of Britain's parliament building on Wednesday, an assailant was shot outside and several people lay bleeding on a nearby bridge, Reuters witnesses and officials said.
Reports suggest that at least a dozen people injured on Westminster Bridge and photographs showed people lying on the ground, bleeding heavily. The number of casualties was unclear.
Prime Minister Theresa May was safe after the incident, a spokesman for her office said. He declined to say where May was when the attack took place.
The leader of the House, David Lidington, said in the chamber that an assailant who stabbed a policeman had been shot by police.
Amid confusing scenes, it appeared the incident may have unfolded in several locations, including the busy bridge where tourists often congregate to take pictures of Big Ben and other attractions.
The incident took place on the first anniversary of attacks on Brussels in Belgium.
Avoid Parliament Sq, Whitehall, Westminster & Lambeth Bridge, Victoria St up to junction with Broadway & Victoria Embankment/tube #London- Metropolitan Police (@metpoliceuk) March 22, 2017
Four people were killed and at least 20 injured in London on Wednesday after a car ploughed into pedestrians and an attacker stabbed a policeman close to the British parliament in what police called a "marauding terrorist attack". The dead included the assailant and the policeman he stabbed, while the other two victims were among those hit by the car as it tore along Westminster Bridge before crashing into railings just outside parliament.