There have been reports that Prime Minister Theresa May’s car sped out of Downing Street.
Staff in Parliament have been told not to leave their offices.
Pictures emerged of a car having crashed into the railings of Parliament at the end of Westminster Bridge.
Press Association reporter Laura Harding, who was in Westminster at the time of the incident, said: “Everyone has been evacuated into Central Lobby, including a group of schoolchildren and kitchen staff.
“Around 15 schoolchildren aged around 10, with armed police coming through the lobby now.
“The children are really calm, the teachers are comforting them.
“Everyone is standing around on their phones.
Staff inside Parliament said the building was being evacuated floor by floor.
Mrs May was seen being ushered into a silver Jaguar car as what sounded like gunfire rang out at Parliament during the incident at around 2.45pm.
“There are also a bunch of young people from the Hammersmith Boxing Club in their tracksuits and the British Lionhearts boxing group.”
Leader of the House of Commons David Lidington told MPs: “Mr Deputy Speaker thank you first of all colleagues will have appreciated events have been moving rapidly.
“I want to emphasise the knowledge I have which is definite is very limited what I am able to say to the house is that there has been a serious incident within the estate.
“It seems that a police officer has been stabbed, that the alleged assailant was shot by armed police, an air ambulance is currently attending the scene to remove the causalities.
“There are also reports of further violent incidents in the vicinity of the Palace of Westminster but I hope colleagues on all sides will appreciate that it’d be wrong of me to go into further details until we have confirmation from the police and from the House security authorities about what is going on.”
Scotland Yard said on Twitter that officers – including firearms officers – are on scene and dealing with the incident in Westminster.