At least one person has been injured as a terrifying video showed hundreds of people fleeing the scene.
Explosion in Oxford Street erupts 'metres from shoppers' leaving one injured
Another clip shows a blackened pavement where the explosion took place, before a throng of people are pushed back by a police cordon - dailystar.co.uk.
One witness said her friend had heard people screaming and crying as an explosion erupted.
Many were fearing the worst following the devastating terror attacks in Barcelona, London and Manchester.
"What's going on on Oxford Street..? Smoke and running," another asked.
A third added: "Metres away from an explosion on Oxford Street."
"That moment when you see crowds of people running past your restaurant's window in horror looking back," one onlooker wrote.
The popular tourist hotspot was closed off between Oxford Circus and John Lewis with buses on diversion.
Cordons have now been lifted and emergency services stood down.
The Metropolitan Police have since confirmed the incident was caused by a small electrical explosion.
"We're dealing with a small 'power network explosion' at 7pm in Oxford St, W1," a statement read.
"We're aware of one man with minor injuries. Cordons in place."
The incident is being investigated by Scotland Yard.
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