Witnesses feared a man who attacked another man with a machete in Sheffield city centre "was going to kill everyone".
Shoppers scattered and stores locked their doors as the attacker brandished the weapon outside the McDonald's restaurant on the busy High Street, witnesses said.
South Yorkshire Police said a 47-year-old-man suffered non-life-threatening injuries, but stressed the incident is not believed to have been terrorist-related.
A spokesman said a 21-year-old man was arrested on suspicion of attempted murder after officers, alerted by city centre CCTV operators, arrived within two minutes.
One woman said she saw the man brandishing what she thought was a sword as she walked past on her way to work.
She said: "It was a sword. We were so scared. We thought he was going kill everyone."
The woman said she took refuge in the McDonald's.
She said: "The first thing I thought was it was terrorism.
"I was just walking to work and I just wanted to get safe. We went into the restaurant and they locked the doors."
George Speight, from Goldthorpe, South Yorkshire, said the injured man had a slash all the way down his face.
Mr Speight said he had gone into the McDonald's for a coffee when everyone suddenly rushed towards the front.
He said: "I turned round to see what the commotion was. There was a coloured guy stood with a big machete, about 15in long.
"And then there's a bloke running towards me with his face slashed all down one side. The manager and me ran towards the door, we locked the door.
"The next thing, the coppers have Tasered (the attacker) and jumped on him."
Asked if the man resisted the officers, he said: "He had no choice because they Tasered him and about eight people jumped on him."
Mr Speight said the man appeared to have mental health issues, adding: "He didn't seem in the right frame of mind, at all."
The incident happened at 9.26am on Thursday. The McDonalds restaurant remained closed on Thursday afternoon as police guarded the scene and a forensics officer investigated.
Superintendent Paul McCurry said: "The CCTV operatives in Sheffield spotted a man with a machete. As a result they alerted police on the radio and nearby officers were on scene within less than two minutes of the call.
"They quickly detained the offender, placing the safety of the public over their own without hesitation. This is a superb example of the bravery of police officers who every day do amazing work to protect the public."
The police spokesman said the arrested man remains in custody. He was detained on suspicion of attempted murder, possession of a knife or bladed article and possession of drugs.
Witnesses said the injured man, who suffered wounds to his head, walked out of the McDonald's and into an ambulance.
A spokesman for McDonald's said: ""We can confirm that an incident which started outside our Sheffield High Street restaurant this morning resulted in the police being called and the restaurant being closed to allow them to investigate.
"We are supporting our restaurant team who were working at the time of the incident."
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