Passenger Mark Whitby told BBC News he had seen a man of Asian appearance shot five times by "plain-clothes police officers" with a handgun.
"I saw the gun being fired five times into the guy - he is dead," he said.
Passengers were evacuated from the Northern Line station in south London. The incident followed four minor explosions in the capital on Thursday.
Police have cordoned off a 200-metre area around Stockwell station.
Services on the Victoria and Northern lines have been suspended following a request by the police, London Underground said.
Ambulances including an air ambulance have been sent to the scene at Stockwell.
Mr Whitby, told BBC News: "I was sitting on the train reading my paper.
"I heard a load of noise, people saying, 'Get out, get down'!
"I saw an Asian guy run onto the train hotly pursued by three plain-clothes police officers.
"One of them was carrying a black handgun - it looked like an automatic - they pushed him to the floor, bundled on top of him and unloaded five shots into him."
Passenger Alison Bowditch told BBC News: "The tube pulled into the station and we were sitting there, you know, as you do and then there was just a lot of shouting and the sound of gunfire and then people were saying, 'Get off, get off!'
"Somebody definitely went to the ground and as they went to the ground I heard gun fire and assumed they had been shot."
Full story...