Bargain-hunters fled and armed police were called to a shopping centre after a fight erupted in a shoe shop.
Rumours that a gunman was on the loose quickly spread through Intu shopping centre, formerly The Glades, in Bromley, south-east London, sparking alarm.
A video posted on Twitter shows shoppers, including families, screaming and running out of the centre.
Those caught up in the panic shortly before 4pm on Saturday afternoon told how they feared there had been a terror attack.
Keith Moon, 35, an app developer, was out shopping with his wife when he suddenly saw people running through the centre.
He later saw a male youth in handcuffs and bleeding from the head being led away by police, who were carrying a 2ft-long machete believed to have been recovered from the scene.
He told the Press Association: "We could see people running towards the exit, it wasn't quite clear what it was at first. But then they seemed to be running in panic.
"My wife heard someone say that there was a gunman running around so we ran towards the exit.
"We got outside and there were a lot of people, some quite emotional."
After about 20 minutes Mr Moon and his wife walked around to another of the centre's entrances and saw police officers leading away the teenager in handcuffs.
He said: "We walked back in and saw the police leading a young guy in handcuffs away. One of the policemen was holding a machete around 2ft long. It was really, really rusty - it didn't look clean.
"The young kid was bleeding from his head.
"We ventured further into the Glade and the shoe shop Aldo was cordoned off and you can see stuff has been knocked over and I think there was a little bit of blood."
Describing the scenes, Mr Moon added: "It was really chaotic, especially given recent events it was pretty scary. My wife was concerned it could be a terrorist attack. It was definitely a concern. And when you find out it is a guy with a machete and you don't know the reason why, that is scary."
The online video shows people running out of the centre while a man can be heard saying "everyone is running in Bromley you know".
Another video appears to show a uniformed officer looking through a JD Sports shopping bag and one taking a machete into a police van.
Officers arrested the youth on suspicion of affray and possessing an offensive weapon, and are looking for another six youths who fled the scene.
Scotland Yard said they were called at 3.45pm to reports of an injured youth at the shopping centre.
They said: "Officers attended the scene and found the boy with a minor head injury. At this stage officers believe he sustained the injury as a result of an altercation between a number of youths.
"The injured boy has been arrested for affray and possession of an offensive weapon. He currently remains in custody at a south London police station.
"Two knives were recovered at the scene.
"Detectives are seeking to trace approximately six youths who ran off from the scene shortly after the incident. This is not believed to be terrorism related."
Scotland Yard said armed officers were sent to the scene but "once it was established this was not a firearms incident their assistance was not required".
Eyewitnesses on Twitter described scenes of "panic" and said shoppers were "running for their lives".
Nelson Adeosun, 27, who works in television, said: "It was really busy because of the Boxing Day sales and there was a mass exodus of people on the ground floor. They were shouting and running.
"We ran down and we heard that somebody had pulled a knife."
Mr Adeosun, who was out shopping with his brother, said he feared for his life as he ran out of the building.
He said: "People were running, some with children, and they were dropping stuff. It was a stampede.
"Literally the whole place was evacuated in a couple of minutes."