In the biggest exercise of its kind ever staged, Operation Strong Tower is a 'noisy and visible' practice run for more than 1,000 Met police, armed forces, transport workers and Whitehall officials.
In extraordinary scenes, volunteers posing as members of the public have been see with bloody wounds and fake severed limbs being lifted on stretchers by the emergency services.
Deputy Assistant Commissioner Maxine de Brunner says the Met has never before put on an exercise of this magnitude and it was designed to be 'very realistic'.
Comment: The UK government is sure taking the opportunity to ramp up the fear factor in the populace and increase the population's desire for security:
The dramatic public display of how the UK's security services would respond to an extremist's deadly assault comes as efforts continue to identify British holidaymakers killed by an ISIS gunman on Friday.
Armed police were also seen piling into a disused London Underground station earlier this morning as part of the exercise
David Cameron said today's operation will 'test and refine the UK's preparedness for dealing with a serious terrorist attack'.
The two-day training exercise began in central London this morning to see how a large number of agencies work together in the face of a chaotic and dangerous situation.
Ms de Brunner, the exercise director, said: 'The exercise is designed to test command control and coordination of a multi-site marauding terrorist attack.'
This morning it included 'a test of the emergency service response to a terrorist attack, at the disused tube station at Aldwych'.Surrey Street, which runs from the Strand to the Thames, was closed in the exercise which has been 'highly visible and audible to the public'.
Comment: It sure seems like the UK government is doing all they can to make their mock exercise as public as possible.
The first officers to arrive on the scene of the fake terror attack were 'put through their paces by mounting an operation to contain the area, evacuate the public, rescue and treat the wounded, manage a crime scene and importantly catch the people responsible', the Deputy Assistant Commissioner said.
The exercise is designed to test command control and coordination of a multi-site marauding terrorist attack - Scotland Yard's Maxine de Brunner
Police stressed that the ambitious exercise had been planned since January, but it will take on extra significance after the deadly shootings in Tunisia.
Comment: So the attack in Tunisia occurred on the eve of these training exercises. It's doubtful that is just a coincidence.
Met Police Commissioner, Sir Bernard Hogan-Howe, said: 'The threat level for terrorism has been raised over the last year and it is vital that we train and we learn.
'Today's exercise will test our people in how to respond to a terrorist threat and we will learn from the mistakes that we are bound to make today.
'It's best we make them today in an environment were we don't have terrorists, than make those mistakes when we do.'
The exercise started with a group of terrorists running down the street shooting pedestrians with dummy AK-47 rifles
'It is clear during that time that we've disrupted some very serious plots and some of those cases are going to the courts.
'We are testing here today in London, our capital city; I think people would expect us to do that.
'We've got lots of good leaders and lots of well trained people who are able to respond to the terrorist threat. The reason that we have these exercises is to make sure we are well trained.'
Sir Bernard added: 'The reason we have exercises like today is because, obviously, we are concerned there are people planning terrorist events. We intend first of all to stop them from getting to attack. But should we not stop the terrorists in their planning, it's essential we disrupt them in any of the attacks that may take place.'
The exercise includes 1,000 Met police officers and staff, as well as teams from ambulance and fire services, Transport for London, the Home Office, Cabinet Office, Foreign Office, Department for Transport, Ministry of Defence, Department of Health, NHS England and the Department for Communities and Local Government.
Miss de Brunner said: 'This exercise is focused in the extreme end of what may happen, and I'd like to stress it is not being carried out in response to any specific intelligence
'And I'd like to reiterate to you all that this has been months in the planning - since January.'
However, police and intelligence services believe the biggest threat against Britain comes from an attack by a 'lone wolf' who is not connected to any wider terror cell.
Security officials say they are the hardest plots to disrupt because they can be the work of a single person with little or no contact with known terrorists groups.
Police have had to draw up plans on how to respond to an ongoing gun attack, in which the perpetrators target dozens of people in public areas over a long period, as seen in Mumbai in 2008.
Fears of a 'marauding' gun attack have been raised after 18 people were taken hostage and two died in a siege in a coffee shop in Sydney last December, and the attack on the offices of the Charlie Hebdo magazine in Paris in January in which 12 people died.
On Friday gunman Seifeddine Rezgui targeted tourists at the Tunisian beach resort of El Kantaoui near Sousse, killing 38 people including at least 18 British holidaymakers, making it the worst terror attack on Britons since the July 7 London bombings in 2005.
Police chiefs argue they are better prepared for an attack than a decade ago, but have ordered today's training exercise to adapt to the evolving threat.
Volunteers playing hostages appeared from a building near the old Aldwych tube station with their hands on their heads
'Given the changing nature of the very real terrorism threat and events around the world - Paris and Australia - we need to constantly adapt our plans and prepare for new and emerging threats.'
She added: 'What is vitally important to all the agencies involved, who routinely work together, and to Londoners is that when the very worst happens we are prepared to be the very best that we can and understand how each other will all operate together
'We have sound plans and highly dedicated, brave staff, that Londoners can be confident in.
'However, only through testing and exercising, constantly challenging our assumptions, refining our tactics and learning from our own experiences and those from others around the world can we be confident in our ability to respond.'
It comes as the police launched their biggest counter-terror operation for a decade over fears a 'lone wolf' attack could be launched using sub-machine guns smuggled into Britain.
The National Crime Agency has warned of the 'increased threat' posed by Skorpion weapons from the Czech Republic imported by gangs which could be used to kill dozens of people in copycat of the attack in Tunisia on Friday.
Scotland Yard has drafted in 600 officers - the biggest since the 7/7 bombings - and the Army is on standby to support police.
Terror manuals outlining how to make bombs and use firearms effectively are also being circulated by British extremists online. The interactive guides, which encourage 'lone wolf' attacks, were compiled by a militant from England who claims to have links to ISIS.
They include step-by-step instructions on how to make car bombs 'Iraqi style' and a piece on staying anonymous while using a smartphone.
What would government do without terrorism?