The Metropolitan Police said officers were called just after 4:30 p.m. after "a number of reports of shots fired on Oxford Street and underground at Oxford Circus tube station."
Shoppers were seen fleeing the scene and at least one woman was injured.
Police said they responded to the reports of gunfire "as if the incident is terrorist related."
Armed officers swooped on the area but the British Transport Police said no evidence of gunfire was found.
“The area was searched swiftly,” it said. “We have not located any trace of suspects, evidence of shots fired or casualties.”
Shop workers in the area told Arab News that hundreds of people rushed into stores seeking cover as the incident unfolded, perhaps wary of the five terror attacks that have hit the UK this year.
Harry Haley, an employee at Urban Outfitters near Oxford Circus station, was on the shop door at the time. “Just before 5pm I saw people sprinting away from the tube station. Tons of people came into the store and rushed towards the back where the lifts are,” he told Arab News.
"It was quite frightening but we’ve been prepared for this kind of thing. We closed the door, calmed people down and asked them to go upstairs.”
Nitin Bhuhdia, store director at Mango on Oxford Steet, said: “I saw people running in panic, nobody knew what was going on at the time.
“We evacuated the store and then started letting people back in to keep them safe because some couldn’t find anywhere sheltered to go to. They sort of found refuge in our store.”
Oxford Circus station is at the crossroads of the UK capital’s best-known shopping streets, Oxford Street and Regent Street. The area was buzzing on "Black Friday," known for hefty discounts offered to shoppers.
John Taylor, store manager at the Russell & Bromley store on Oxford Street, told Arab News that customers were evacuated from the shop during the incident.
He said that people in London had been on "alert" since the March terror attack on the British Parliament.
"Obviously today (Black Friday), being one of the busiest days of the year, we were expecting something like this to happen,” he told Arab News.
"It’s not something that’s news to us unfortunately, you just try to get on with life."