Video footage of the confrontation showed Khan, 28, being challenged by a man, reportedly a Polish chef, wielding the tusk - believed to have been taken from a nearby historic hall - and sprayed with the extinguisher
Prime Minister Boris Johnson vowed on Saturday to review Britain's sentencing system after a convicted terrorist released early from prison was suspected of stabbing two people to death in an attack around London Bridge.
Police shot and killed Usman Khan after his suspected assault that seriously injured three other people was broken up by bystanders - one armed with a five-foot narwhal tusk and another a fire extinguisher.
Video footage of the confrontation showed Khan, 28, being challenged by a man, reportedly a Polish chef, wielding the tusk - believed to have been taken from a nearby historic hall - and sprayed with the extinguisher.
He had been conditionally released from jail last December after serving less than half of a 16-year prison sentence for terrorism, and was wearing a suspected fake explosive device.
Moments later armed police officers arrived on the scene and shot him dead.
Investigators have said they are not actively seeking others in relation to the incident, which recalled a three-man terrorist assault two years ago on London Bridge that killed eight.
The latest attack came less than two weeks before Britain's general election, and politicians temporarily suspended campaigning.
"It does not make sense for us as a society to be putting people who have been convicted of terrorist offences... out on early release," Johnson said as he visited the scene.
"We argue that people should serve the tariff, serve the term, of which they are sentenced," the prime minister added, noting the Conservatives' manifesto calls for a tougher sentencing regime.
'Bundle him to the ground'
Khan, a British national from Stoke in central England, was handed an indeterminate sentence for public protection in 2012, with at least eight years in prison.
He was part of an eight-man network inspired by Al-Qaeda who had plotted to bomb targets including the London Stock Exchange, and planned to take part in "terrorist training" in Pakistan.
But his sentence was quashed by the Court of Appeal in April 2013 and he received a new 21-year term, comprising a custodial sentence of 16 years and five years on conditional release.
Police on Saturday were reportedly searching a property in Stafford, in central England, thought to be connected to Khan.
Police believe he began the attack at Fishmonger's Hall, a historic building said to contain many ancient artefacts on the north side of the bridge.
Khan was attending an event organized by the University of Cambridge's criminology institute on prisoner rehabilitation, and reportedly arrived with two knives and the fake suicide vest.
The Metropolitan Police appealed for witnesses to come forward.
As the attack moved to London Bridge, a throng of people could be seen in videos grappling with Khan on a pedestrian walkway.
They reportedly included a convicted killer on day-release from prison and other ex-offenders also attending the criminology event.
Tour guide Stevie Hurst told BBC radio that "everyone was just on top of him trying to bundle him to the ground.
"I saw that the knife was still in his hand so I just put a foot in to try and kick him in the head," he said.
One man in a suit and tie - identified by media as a police officer - was later seen carrying a large knife away.
"As we saw the worst of human kind, we saw the very best of human spirit and London," Met Commissioner Cressida Dick said Saturday as she visited London Bridge.