Witnesses reported seeing debris falling from the sky after the aircraft struck the crane before exploding into flames and plunging to a street near Vauxhall Station during rush hour.
A driver managed to walk away from his car after it was struck by the helicopter.
The Metropolitan Police commissioner Sir Bernard Hogan-Howe confirmed that there were two deaths and nine people injured.
The pilot was killed in the crash along with one person from the building or surrounding area.
The aircraft was on a scheduled flight from Surrey when the crash happened.
London Fire Brigade station manager Bruce Grain, one of first firefighters at the scene, said it "was absolute chaos" but he revealed the fire was put out within 20 minutes.
Eight fire engines, four fire rescue units and around 60 firefighters plus officers attended the scene of the crash, a few hundred yards from MI6, on a busy road.
Four fire engines and two fire rescue units also attended reports of a crane in a precarious position.
The crane was on top of a building called The Tower in the St George Wharf development, and is billed as one of Europe's tallest residential towers.
Video footage shot on a mobile phone showed an entire road blocked by burning wreckage and aviation fuel. The side of a building on one side of the street was also damaged by the flames.
Paul Ferguson, who was working in an office near the incident, said: "There was a flash and the helicopter plunged to the ground.
"It may be that on this misty morning the lights on nearby St George Tower weren't on and it moved and clipped the edge of the crane and lost control."
The aircraft is understood to be an AgustaWestland AW109, a lightweight, twin-engine helicopter with eight seats.
The Met Police said it was "aware" of 11 casualties, including two dead.
Four people were taken to south London hospitals and five people were treated at the scene for minor injuries.
There was some confusion around the number of people in the aircraft, although it was earlier reported that it was flying between Gatwick and Elstree with two on board.
However, a spokesman for the RNLI said London Coastguard was contacted by Battersea London Heliport, which confirmed it had lost contact with one of its aircraft.
A lifeboat was launched from the Tower RNLI lifeboat station to search the Thames but was later stood down.
Prime Minister David Cameron today said he was "very saddened" by news of the deaths.