Witness Nicole Kyle was walking home when she saw armed police swoop on the scene and quickly put up a cordon.
It came moments after a man was arrested and two police officers were injured earlier this evening.
The 25-year-old consultant said: "I was walking toward The Mall and St James's Park when I saw police rush down toward the palace in great numbers. As we got further down The Mall we saw armed police outside a police van, at which point we were able to walk closer to the palace still, where we were eventually stopped by a cordon.
"All we were told was that there's been an incident. A few minutes later police came by to have us clear the area and move further away from the palace. We then saw that police had expanded the cordon. It looks like the cordon is continuing to expand."
A man has been arrested outside Buckingham Palace on suspicion of grievous bodily harm and assault after two officers were injured, Scotland Yard said tonight.
Scotland Yard said the officers suffered minor injuries in the course of arresting the man but no other people were injured, the force wrote on Twitter. The London Ambulance Service attended to treat the injured men but they were not taken to hospital.
The man was stopped outside the royal grounds in possession of a knife at around 8.35pm.
Kiana Williamson added: "We turned up and there was one police van and one car, there was also a civilian's car that had veered towards the police car.
"They were trying to get the man out of the car, shouting, more police were arriving on to the scene and the man was fighting back.
"I saw one injured policeman with an injury to his arm although it didn't look severe. He was being tended to by another officer.
"The man had been restrained and looked almost unconscious by the side of the road. I didn't see the car driving but the car had been left at the side of the road and an eye witness had said that he had driven towards the police car. The whole encounter lasted around one minute.", she added.
The Metropolitan Police said it was too early to know whether the incident was terror related.