The government will introduce emergency legislation to prevent terrorists from automatically being released from prison before serving all of their sentence.
Justice secretary Robert Buckland also said those jailed for terror offences will have to appear before the parole board before they can be released.
He made the announcement the day after Sudesh Amman, 20, was shot dead by police after stabbing two people in what is believed to have been an Islamist-inspired attack in Streatham, south London on Sunday afternoon.
Mr Buckland said the latest attack made the case “for immediate action”.
Under the emergency legislation, terror prisoners, including ones currently in prison, will not be allowed to be released until they have served two thirds of their sentence and not until the parole board has agreed.
“Yesterday’s appalling incident makes the case plainly for immediate action,” Mr Buckland told the House of Commons on Monday afternoon.
“We cannot have the situation, as we saw tragically in yesterday’s case, where an offender – a known risk to innocent members of the public – is released early by automatic process of law without any oversight by the Parole Board,” he said.
He said the new legislation would mean people convicted of terrorism offences will no longer be released automatically after they have served half of their sentence.
Because we face “an unprecedented situation of severe gravity”, the legislation will also apply to serving prisoners, Mr Buckland said.
Amman was automatically released a week ago but kept under surveillance by armed officers, who shot him after he began his attack. He wore an imitation suicide belt.
Witness on bus films alleged terrorist being shot #streatham
The government cannot use sentencing as a way of distracting from their record of bringing the criminal justice system to breaking point
Labour’s Richard Burgon says he had 20 minutes’ notice of the government’s statement, leaving him in an “unacceptable position” He adds that government cannot use sentencing to distract from “bringing the criminal justice system to breaking point”
Responding to the government announcement in the Commons, shadow justice secretary Richard Burgon said the justice system was in “crisis” due to funding cuts.