Three people are in a life-threatening condition after the suspected arson attack at Indian Aroma in Woodford Avenue, Gants Hill, at about 9pm on Friday (August 22).
CCTV footage seen by the PA news agency appears to show a group of people with their faces covered walk into the restaurant before pouring liquid onto the floor.
Seconds later, the inside of the restaurant is engulfed in flames.
Part of the ground floor was damaged by fire, and crews rescued five people from the restaurant. Nine others got out beforehand, London Fire Brigade said.
Sayed Bokhari, 39, said he had spoken to the manager of the restaurant, adding: “He was crying. He was very shocked. He was really crying. He was extremely scared.”
Mr Bokhari said: “It’s awful and it’s very scary.”
“It looked like a scene from Halloween. It was a serious, dramatic thing and people were running around him,” he said, referring to the injured man.
Mr Bokhari, who has run a business in the area for 15 years, said: “It is scary because we run retail stores which are welcoming customers in.
“The doors are open like the doors of your house. We cannot body check everyone to see if they are safe. There is only so much that high street security can do.
“It is scary. You are worried for people. You are worried about your business.
“London is not such a fun place any more.”
Five people – three women and two men – were injured in the incident. They were treated at the scene by paramedics and taken to hospital, where they remain.
Three of the five are in a life-threatening condition, the Metropolitan Police added.
No arrests have been made.
The cause of the blaze is being investigated by firefighters and the Met.
One local resident described the aftermath of the suspected arson attack.
Hospital porter Edward Thawe, 43, stepped outside his nearby home with his 12-year-old son to see if he could help after hearing screaming.
The police and ambulance were already at the scene, which Mr Thawe described as “horrible” and “more than scary and the sort of thing that you don’t want to look at twice”.
He said he thought one man who was on the street and a woman who was also outside may have been customers.
Mr Thawe added that the man’s “whole body was burnt”, including his shirt, but he was still wearing his trousers.
Another Ilford resident, who did not want to give his name, said he went outside after hearing screaming and the sound of sirens in the street.
He said he saw three injured people being doused by the emergency services.
He said they were “severely burned” and he saw they were being given oxygen.
He added: “I can only imagine the pain they were going through.”
“I came down because there were so many police and ambulance sirens and when I open the doors there were lots of lights flashing and I could see the scene.
“I could not sleep properly last night over it. It was just absolutely horrible situation.”
Uniformed officers guarded the police cordon that was in place on Saturday as forensic officers in protective clothing examined the scene.
The taped cordon stretched from outside the shop, which faces on to a busy main road and on to the pavement.
A trail of what appeared to be bloody footprints along the pavement was spotted by a forensic officer.
A number of items were also bagged up in clear plastic carriers.
Detective Chief Inspector Mark Rogers, of the Met’s Central Specialist Crime North unit, said: “We understand this incident will cause concern within the community. My team of specialist detectives are working at speed to piece the incident together.
“Locals can expect to see a large police presence in the area. If you have any concerns, please speak to those officers on the ground.”
Anyone with information is urged to contact the Met on 101, quoting 7559/22AUG. If you wish to remain anonymous, speak to Crimestoppers on 0800 555111.
