Andrius Vorobjovas was celebrating a friend’s birthday at the Boro Bistro restaurant on 3 June 2017.
Terrorists drove a van down London Bridge and smashed into railings, before going on a stabbing rampage in the area and in nearby Borough Market.
Mr Vorobjovas said debris rained down on diners sitting in the restaurant courtyard.
He described the moment an attacker emerged, wielding a bloody knife which had just been used to stab somebody.
“I saw a man’s blade and a swing away. I saw a bloody blade,” Mr Vorobjovas said.
“I ran. You could hear the tables moving, glasses smashing, people running.”
The witness ran to some nearby flowerbeds and hid for around 20 seconds behind a trellis in an alleyway.
He described the moment he jumped over a flowerbed and almost trampled on James McMullan, 32, who was lying in the alleyway after being stabbed.
Mr McMullan was the only British citizen killed in the attack.
“I nearly stepped on a person on his belly. I was very shocked and amazed to see someone there because I could not figure out how they got there,” Mr Vorobjovas said.
“When I jumped over the flowerbed I nearly stepped on him.”
Mr Vorobjovas described the entrepreneur as lying star-shaped in the alley on his front, but did not check on the victim.
“Literally at that moment I thought the individuals are coming our way,” he said.
“I just went down on my knees and tried to hide behind the flowerbed.”
“Whilst I was there I did not see any movement. He was right next to me.”
After 15 to 20 seconds he ran out of the passage and on to the main road.
He said he later directed armed police officers in the direction of the Boro Bistro before meeting his wife, who took him home.
When asked by Mr McMullan’s family lawer if he had not paid “particulalry close attention” to the 32-year-old, Mr Vorobjovas agreed
“I did not check,” he said. “I was sitting right next to him virtually but I was expecting someone to come my way any moment.”
Mr McMullan, from Brent, had been out with friends in the Barrowboy and Banker pub watching football before the attack.
He left to have a cigarette but was unable to re-enter the pub and arranged to join his friends at the Boro Bistro instead.
The 32-year-old tried to help Sara Zelenak, a 21-year-old, who appeared to trip while walking in high heels as the rampage went on.
The inquest previously heard that Mr McMullan was helping the Australian au pair to her feet when they were both stabbed.
An inquest into the deaths of their eight victims continues at the Old Bailey.
Additional reporting by agencies