The helicopter was reported to have been carrying a pilot but no passengers. It struck the ground just 20 yards from Vauxhall station, a major commuting hub in the capital.
A witness said the helicopter struck the side of the 51-storey St George Wharf Tower, Britain's tallest block of flats currently under-construction, near the river Thames, as it crashed.
Witnesses reported seeing a "massive ball of flames" and a deafening "explosion" after the helicopter plunged more than 700 feet to the ground.
Metropolitan Police Commander Neil Basu told reporters at the scene of the accident that "the pilot of the helicopter was killed. The other (person killed) was in the proximity of where the aircraft came down".
Of the thirteen wounded, six were admitted to a hospital and one of them was said to be in a critical condition.
Police said there was nothing to suggest a terrorism link to the crash.
"There's nothing in our world at this stage," a spokesman for London's Counter Terrorism Command said. "There's nothing to suggest any terrorism link," he added.
Witnesses reported very low cloud and misty conditions at the time of the accident, suggesting the pilot may not have seen the crane atop the building which was barely visible from street level.
Witnesses said the helicopter, which is believed to have been heading from Redhill, Surrey, to Elstree, Hertfordshire, to collect an executive was using the route of river Thames when it hit the crane at 8am near Vauxhall Bridge in Vauxhall.
A spokesman for London Heliport at Battersea said the pilot had requested to divert and land there due to bad weather.
At least two cars were hit by debris from the crash.
A motorist is in hospital after being rescued from a burning car by fire crews.
Fire brigade station manager Bruce Grain said crews arrived at the scene in four minutes.
He said the AgustaWestland AW109 twin-engine helicopter, fell into Wandsworth Road, hitting various vehicles and bursting into flames and there were also fires in nearby buildings, the BBC reported.
Eight fire engines, four fire rescue units and around 60 firefighters were at the crash site with the police and ambulances.
Burning wreckage lay in the road but firefighters have brought the fire under control.
Dense black smoke was billowing from the area after the helicopter spiralled to the ground.
Soon after the accident, the Air Accidents Investigation Branch (AAIB) began its probe.
A spokesman for London Fire Brigade said the crane was "in a precarious position" and the area was evacuated.
The incident caused gridlock with all approaches to the Vauxhall Cross one way system closed at the height of the rush hour and Vauxhall Tube station and railway station also closed.
A spokesman for London Mayor Boris Johnson said: "This is clearly a major incident involving considerable numbers of emergency service personnel".
"The Mayor's thoughts are with the families of the two victims and with those injured. The Mayor has spoken with Met Police Commissioner Bernard Hogan Howe and Transport Commissioner Peter Hendy," he said.
"He remains in close touch with all his Commissioners and he will continue to monitor the situation closely," he added.
Witnesses described scenes of "absolute madness and fear".
They reported cars on fire and people screaming.
As investigations begins into the fatal crash the focus will be on strict rules surrounding helicopter flights over the city. The AAIB will be looking into the events leading up to the incident and whether proper procedures and routes were followed.
Chris Yates, an aviation expert, said that helicopters are not supposed to come within "500 feet of any structure such as a high-rise building, so we don't know what caused the pilot to get quite so close".