Armed police fired Hatton rounds - large shotgun ammunition used to stop vehicles - at a car on Mansell Street, close to the Tower of London, on Sunday night.
Two men, both aged 25, were arrested in the street, while a 28-year-old man was arrested in Westbourne Grove, west London, and a 29-year-old was detained in Peckham Street, south-east London.
All the men were arrested on the suspicion of the commission, preparation or instigation of acts of terrorism, Scotland Yard said, and were being quizzed at a south London police station. As six addresses across London continued to be searched by counter-terror officers, further eyewitness reports emerged.
Ramin Massodi described the suspect arrested in the upmarket Westbourne Grove raid as "handsome".
Mr Massodi, who witnessed the drama unfold from inside the Persian restaurant where he works, added: "He definitely didn't look like a terrorist at all."
He said police came into the restaurant and apprehended another man, but later released him.
A restaurant owner on the street where the man was arrested in Notting Hill said the incident closed down most of the street.