Sky News television reported that a siege situation was underway, and a police spokeswoman confirmed that no arrests were immediately made after the incident off King's Road in west London.
"It's an ongoing incident at the moment," she said.
She added that police were called after reports of gun shots at an address in Markham Square. "It's believed shots were fired at police. Firearms officers have discharged their weapons."
A nearby shop manager said police had ordered him to lock himself in, while police continued to deal with the situation.
"The police won't let us anywhere near. We are now stuck in the shop. They said 'stay in the shop, lock the door and go to the back," said Shan Nimalakumar, 36, of the health store Holland and Barratt.