Brazil's Foreign Ministry demanded an explanation for the "lamentable error" which saw 27-year-old electrician Jean Charles de Menezes pursued through a railway station before being cornered and shot repeatedly in the head.
British Muslim groups called for a public inquiry into the shooting, worried that the Asian ethnic origin of some of the bombers could see Muslims targeted by police.
But newspapers and London's mayor called for understanding.
The carnage of the 7 July bombings, in which four attackers and 52 others died, and the near-miss on Thursday when bombs used in a repeat attack seemingly failed to explode properly, meant police faced an impossible situation, they said.
Terrified train passengers scattered in panic on Friday morning as plain-clothed police pursued Menezes who, relatives said, was going to work through Stockwell Underground station in south London.
Shot five times
Witnesses said the Brazilian fell to the floor in a train carriage before a policeman standing directly above the man shot him five times in the head.
"For somebody to lose their life in such circumstances is a tragedy and one that the Metropolitan Police Service regrets," London's police force said on Saturday in their first admission they had killed an innocent man.
Initially, police said Menezes was linked to Thursday's attacks, noting that he was wearing a thick coat on a warm summer day, prompting fears he could be carrying explosives.
"How can you shoot someone on mere suspicion? You can't even put someone in prison on suspicion, how can you kill them like that?"
Massoud Shadjareh, head of the London-based Islamic Human Rights Commission
Massoud Shadjareh, head of the London-based Islamic Human Rights Commission, called for a full public inquiry.
"How can you shoot someone on mere suspicion? You can't even put someone in prison on suspicion, how can you kill them like that?" he said.
"This is very frightening, people will be afraid to walk the streets now," said Azzam Tamimi from the Muslim Association of Britain.
However, London's mayor Ken Livingstone said police had done "what they believed necessary to protect the lives of the public".