Eyewitness reports said at least two cars were on fire at the scene of the crash near an apartment block under construction on the banks of the River Thames at Vauxhall, where a huge plume of smoke billowed into the sky.
The crane was shrouded in mist at the time of the accident. Police ruled out a terror attack.
“Two people have been confirmed dead at the scene. We have no further details,” London’s Metropolitan Police said in a statement.
One of the two victims was in the helicopter. At least two other people were taken to hospital.
Photographs taken shortly after the crash showed a trail of flame on the ground and debris strewn across the road.
The crane was on top of a new apartment building called The Tower at a development called One St George Wharf.
Paul Ferguson, who was working in an office near the incident, said: “There was a flash and the helicopter plunged to the ground. It exploded and you can imagine the smoke coming out of it.”
He told BBC News: “It was probably heading from the nearby heliport. It may be that on this misty morning the lights on nearby St George’s Tower weren’t on and it moved and clipped the edge of the crane and lost control.”
Another eyewitness said he saw a car explode with someone apparently trapped inside.
Steve Carslake said: “We heard a mighty bang, looked up and saw the helicopter just catch the edge of the crane.
“It didn’t hit the tower block itself, it hit the crane and then just came down in a fireball.
“There was a great big lot of black smoke everywhere and there was a couple of cars.
“We heard someone was actually trapped in the car. We went to run towards the car and there was just a large explosion again.
“It was quite devastating to watch, I’m afraid,” he told BBC radio.
An Agence France Presse reporter at the scene said the arm of the crane was missing, apparently after the helicopter collided with it.
A construction worker said he saw the helicopter fly over the Thames towards the building and then he heard a crash and saw parts of the aircraft including a door fall to the ground, as well as pieces of scaffolding.
“I saw the helicopter fly across the Thames and then it made a tour, when it hit the crane,” he told AFP.
“I heard it hit the crane. I went (under cover) so the scaffolding didn’t hit me.”
The crash was causing long tailbacks on roads during the morning rush hour and commuter trains coming in to London from the south were heavily disrupted.
Visibility was low at the time of the crash with the nearby London City Airport reporting delays because of the conditions.