Running battles erupted in the streets with youths and EDL activists in balaclavas throwing rocks at riot police. Some wore paramilitary dress.
Fifteen police vans attended the scene – witnesses said police now “have things under control”.
The dead man is believed to be a soldier who was wearing a Help for Heroes T-shirt when he was ambushed in the street in broad daylight on Wednesday afternoon and attacked with knives and a meat cleaver.
The attack has been described as “politically motivated” after video emerged of one of the attackers. In it he said the attack was “because David Cameron, (the) British government sent troops in Arabic country”.
Both men were shot by police and taken to local hospitals. It is reported at least one of the men had links to Somali militant group al-Shabaab.
An eyewitness said the men claimed it was a “message to the British government”.
David Cameron is returning early from his trip to Paris because of the attacks and subsequent trouble.
Earlier he said that Britain had faced terror attacks such as this before and added: “We will never buckle in the face of it.”
The Royal Artillery Barracks in Woolwich are close to where the attack took place.
She confirmed that she had been briefed by the head of the MI5 on the “sickening and barbaric” incident.