An inquest jury has concluded that opportunities were missed to prevent Sudesh Amman committing a terrorist attack in Streatham last year.
Convicted terrorist Amman was shot dead by police in the south London borough last February after he stabbed two people.
Undercover officers had been following him before the attack.
Amman, 20, who was wearing a fake suicide vest, was then shot within 62 seconds of grabbing a knife from a shop.
On Friday, an inquest jury ruled he was lawfully killed but concluded the attacks could have been prevented.
The jury has been listening to evidence for two and a half weeks at London's Royal Courts of Justice.
Mr Justice Hilliard had directed the panel to find that Amman had been lawfully killed.
But the jury also found that an opportunity had been missed by police and probation services to recall him to prison.
They found the security services could have intervened earlier to prevent the attack after he bought items used to make his fake suicide belt.
He had been released from prison just over a week before the attack and was on licence in the community to serve the remainder of his 40-month sentence.
Two days before the attack police had suspicions he was planning to make a fake suicide vest when he purchased four small bottles of Irn Bru, parcel tape and tin foil.
The inquest jury concluded the police were right not to search his flat, but found that Amman should have been recalled to prison following the purchases.
Deputy Assistant Commissioner for Specialist Operations, Dean Haydon, said the police feared Amman was a threat.
“Police had serious concerns about the attacker’s extremist mind-set, and what he might do upon his release from prison," he said.
"It was for this reason that he was monitored by an incredibly skilled and professional team, who were in the right place at the right time to quickly intervene in what could otherwise have been a murderous attack."
Following the verdict, Mr Justice Hilliard praised the bravery of the officers.
“The Metropolitan police surveillance teams were prepared to put themselves in harm’s way,” he said. “They are all to be commended for their bravery, and they are owed a considerable debt of gratitude for their bravery.”
Metropolitan Police Commissioner, Cressida Dick, praised her officers.
“The armed surveillance officers who responded to this incident, and acted to draw the armed terrorist towards them to stop him attacking others, were incredibly brave," she said.
"I am proud of them and would like to thank-them for their professionalism, courage and decisiveness in the most challenging of circumstances – fast moving, horrific and frightening. The attack happened on a busy high street, and quite simply their quick actions almost certainly saved lives."
Amman's victims have now fully recovered.