An RAF drone strike killed three alleged Isis fighters in Syria, including a Briton, David Cameron has revealed.
Cardiff-born Reyaad Khan was targeted in an attack in Raqqa on 21 August.
The Prime Minister said the strike was "entirely lawful" as he gave a stark warning that threat to Britain from Islamist extremist violence is "more acute today than ever before".
Police and security services have also stopped at least six terrorist attacks against Britain in the last 12 months, the Prime Minister told MPs.
Mr Cameron said the strike in Raqqa was the "only feasible means" of dealing with the terrorists and that it had been "necessary and proportionate".
The PM stressed that it was not part of coalition military action against Isis and the Attorney General had been consulted and agreed there was a "clear legal basis" for it.
In a statement to the Commons, Mr Cameron said: "My first duty as Prime Minister is to keep the British people safe.
"That is what I will always do.
"There was a terrorist directing murder on our streets and no other means to stop them.
"This Government does not for one moment take these decisions lightly.
"But I am not prepared to stand here in the aftermath of a terrorist attack on our streets and have to explain to the House why I did not take the chance to prevent it when I could have done.
"That is why I believe our approach is right and I commend this statement to the House."
The European Commission is understood to be preparing to ask EU member states to take part in a mandatory scheme to resettle 160,000 migrants who have already arrived in the continent.
French president Francois Hollande has said France is ready to take in 24,000 people.
But Mr Cameron told MPs that because Britain is not part of the Schengen open border arrangements which cover many EU states, it was able to "decide its own approach".
"We will continue with our approach of taking refugees from the camps and elsewhere in Turkey, Jordan and Lebanon," he said. "This provides refugees with a more direct and safe route to the UK, rather than risking the hazardous journey to Europe which has tragically cost so many lives."
Refugees coming to Britain will be chosen under established UN procedures and will be granted five-year humanitarian protection visas, said Mr Cameron. The scope of criteria used to identify vulnerable refugees will be "significantly expanded", recognising that children have been particularly badly affected.
"In most cases, the interests of children are best met in the region, where they can remain close to surviving family members," said Mr Cameron. "But in cases where the advice of the UNHCR (High Commissioner for Refugees) is that their needs should be met by resettlement here in the UK, we will ensure that vulnerable children - including orphans - will be a priority."
Pressure to admit more Syrians has grown since the publication of photographs of three-year-old Aylan Kurdi, who drowned with his mother and brother trying to cross from Turkey to Greece by boat.
Mr Cameron told the House of Commons: "The whole country has been deeply moved by the heartbreaking images we've seen over the past few days and it's absolutely right that Britain should fulfil its moral responsibility to help those refugees, just as we've done so proudly throughout our history.
"But in doing so we must use our head and our heart by pursuing a comprehensive approach that tackles the causes of the problem as well as the consequences."
He said Britain had done more than any other EU country to provide aid - now totalling £1 billion - to support refugees in Syria and neighbouring countries, and had moved quickly to provide Royal Navy ships for search and rescue missions in the Mediterranean.
"Without Britain's aid to these camps, the numbers attempting the dangerous journey to Europe would be very much higher," he told MPs.
Mr Cameron said the full cost of supporting the Syrian refugees would be met for the first year from the Government's aid budget.
He added: "We will now go much further in the Spending Review, significantly reshaping the way we use our aid budget to serve our national interest. We will invest even more in tackling the causes of the crisis in the Middle East and north Africa and will hold much larger sums in reserve to respond to acute humanitarian crises as they happen."
Oxfam chief executive Mark Goldring welcomed the Prime Minister's announcement, but urged Mr Cameron to set out an "ambitious" timetable for completing the resettlement programme as soon as possible.
"This is a good step forward, but it's far from job done," said Mr Goldring. "With the terrible conflict in Syria showing no signs of ending, the Government should continue to review how many refugees the UK will resettle."
Steve Symonds, Amnesty International UK's refugee expert, said: "It shouldn't have taken a photograph to get politicians to start to do the right thing, but this news offers a vital lifeline to thousands of Syrians. If acted upon urgently, it will be a truly positive step forward.
"However, it does not address the huge challenge facing Europe right now - countries like Greece and Hungary cannot cope alone. Nor does it offer a solution to the many Eritreans, Afghans and others, forced to flee bullets, bombs, torture and overcrowded refugee camps elsewhere.
"We all need to acknowledge there is no single measure that can immediately solve the current crisis, and no one country can achieve its resolution all by itself.
"So far the UK has been unwilling to share responsibility for refugees arriving in Europe. This position undermines efforts to secure a comprehensive response - saving lives, tackling people smuggling and resolving conflicts and other crises at the heart of this exodus."
Justin Forsyth, chief executive officer at Save the Children, said: "The Prime Minister's announcement to resettle 20,000 Syrian refugees direct from the region into Britain is important and welcome - it will make a real difference to some very vulnerable families and children.
"We also need to help those refugees already in Europe, specifically by taking in 3,000 of the children who have travelled here completely alone. The Prime Minister could continue a proud British tradition, started by the kindertransport, of giving lone children a second chance in Britain."
Maurice Wren, Refugee Council chief executive, said: "The programme needs to be frontloaded as the crisis is now and the expansion must happen as a matter of urgency as people are living in desperate situations in the region and cannot wait until 2020 to reach safety.
"Today's announcement will not, however, help those who are standing on the shores of Libya, contemplating boarding a rickety boat, in a desperate attempt to reach family members already living in safety in the UK.
"We call on the Prime Minister to introduce other ways to allow refugees to reach the UK without having to put their lives in jeopardy."
Britain's challenge in finding legal justification for the targeting of its own citizens in a drone strike follows intense controversy over the issue in America.
David Cameron announced that two Britons who were fighting for Islamic State were killed in an RAF operation, which was carried out without parliamentary approval.
The strike was "entirely lawful" and was approved by the Attorney General, the Prime Minister insisted.
He stressed that the action was taken in the interests of protecting UK citizens amid allegations that those targeted were intent on planning atrocities in Britain.
Analysts drew parallels with this approach to that taken by America in this domain.
Shashank Joshi, senior research fellow at military think tank the Royal United Services Institute (Rusi), said: "It is interesting that the Prime Minister has emphasised the self defence aspect.
"It does present a number of problems but I think the UK government would have had a very careful legal justification for this."
He said discussions around the legal basis for targeting and killing a British national were likely to have surfaced with regard to efforts to locate Mohammed Emwazi, a London student unmasked as IS terrorist Jihadi John.
He said in some senses it was surprising that the UK has only had to deal with this issue now given that its close ally America has come under scrutiny for its targeting of US citizens in drone strikes.
In one high-profile case, American-born cleric Anwar al-Awlaki, a senior al Qaida figure, was killed in Yemen by a remotely piloted US aircraft in 2011.
A redacted memo released last year concerning the legal basis for al-Awlaki's killing stated that his activities posed a threat of violence to US people and interests.
Mr Joshi said: "In some ways it is surprising that the UK hasn't had to confront this problem sooner given that the US has repeatedly had to develop a legal justification and defence.
"Given the large number of Britons who have fought in places like Iraq, Afghanistan and Syria, it's a surprise we haven't had to confront this sooner."
Mr Joshi added: "If it relies only on self defence, it would bring the UK a lot closer to the rationale used by the United States."
He said international law is not "necessarily a clear thing you can find in a single location".
Downing Street has said full details of the legal justification for the strikes will not be published.
Article 51 of the United Nations charter states: "Nothing in the present Charter shall impair the inherent right of individual or collective self-defence if an armed attack occurs against a Member of the United Nations, until the Security Council has taken measures necessary to maintain international peace and security.
"Measures taken by Members in the exercise of this right of self-defence shall be immediately reported to the Security Council and shall not in any way affect the authority and responsibility of the Security Council under the present Charter to take at any time such action as it deems necessary in order to maintain or restore international peace and security."
A friend of a British Islamic State fighter killed in an RAF drone strike has said he feels no sympathy for the dead man.
Ruhul Amin was killed in the attack on a vehicle in which another British citizen, Reyaad Khan, was travelling.
The strike against Khan was carried out without parliamentary authority on August 21 and was the first occasion in modern times that the UK has used military force in a country where it was not engaged in a war, Prime Minister David Cameron told the House of Commons.
Three days later, a second Briton believed to have been involved in plots against the UK, Junaid Hussain, was killed in a US air strike.
Amin was born in Bangladesh and grew up in Aberdeen before reportedly moving with his family to Leicester.
Stephen Marvin, a long time Aberdonian school friend of Amin, told ITV News he could not sympathise with him.
He said: "I feel sympathy for his family of course. It's not their fault at all but it's hard to say he didn't get what he deserved in the end. He was my childhood best friend but he was a totally different person in the last 12-18 months so it was hard to sympathise with him, personally."
He added: "I feel sadness for his family. They didn't ask for any of this. They couldn't have stopped it in any way. For him, I can't have any sympathy for him. Evidently he's chosen to go there and that's his decision."
Mr Marvin said Amin was radicalised in Birmingham.
He told the channel: "He said he met people in Birmingham and he was spoken to there and offered to go to Syria under the promise he was allowed to leave whenever he wanted to. He went over and spent three months in a Koran-type camp that gets you into their type of thinking around the Koran. Then he went on to three months military camp after that.
"The first time I phoned I heard a gunshot in the background. He said it was rebel fighters. He was sitting on a riverbank. He told me when he was speaking. I asked him, 'aren't you scared of getting shot?' He said, if he dies, he'll be with Allah.
"That kind of shocked me. You're not used to hearing - especially in Aberdeen - you're not used to hearing your friends talk like that. He had no fear whatsoever of death. He was confident he was going to a better place."
Khan was 20 when he appeared in an Isis propaganda video titled ''There Is No Life Without Jihad'' in June last year with two other Britons urging Westerners to join the war.
Hailing from Cardiff, he is thought to have travelled to fight in Syria late in 2013.
Mohammad Islam, a former local councillor and family friend of Khan's, said the whole community and family are "very much devastated and shocked" at his death.
Asked about his thoughts on an RAF drone strike killing Khan, he told ITV News: "Obviously it's a little bit shocking for us. We'd like more details on how and why the Government did that.
"We'd like more detail other than just a short briefing regarding the RAF drone strike. Maybe the family would like to hear about the details. Maybe the parents would feel better."