Palmira Silva was found dead in a garden in Edmonton, north London, on Thursday lunchtime.
Police discovered the elderly woman’s body after being called to the residential street following reports of a man wielding a knife and attacking an animal.
One witness told the BBC he had seen “a guy with a machete with blood dripping from it”, next to a headless cat.
London’s Metropolitan Police would not give details of the attacker’s weapon or Silva injuries, although British media said she had been beheaded.
Silva’s family said she was of Italian descent although have not given details of where in Italy she was from and how long she has lived in London. The UK's Evening Standard newspaper reported that she was born in Italy and had run a café in London for more than 30 years.
Police arrested a 25-year-old man close to the scene, who is currently undergoing medical treatment and being held on suspicion of murder. During the arrest one of the police officers was injured and is thought to have a broken wrist.
Authorities said it was “too early” to determine a motive for the murder, stressing the attack was not terrorist related.
“These sort of events on our streets during the day in residential areas are very, very unusual and not common,” Commander Simon Letchford told journalists.
The Metropolitan Police said they were also investigating an attempted attack on two people in the same street.