Newham Council gave the green light in February to triple the size of the existing terminal, and build a new taxi-way along with seven extra parking stands for larger aircraft at the Royal Docks site in East London.
Its plans, which also included building a six-storey four-star hotel, were subject to the mayor’s approval.
The investment would have generated 500 construction jobs and once finished would have enabled the airport to operate up to a permitted 111,000 annual flights, from the 70,000 currently flying.
The council had said permission included conditions to help limit the noise disturbance, such as imposing flight restrictions, erecting a noise barrier and funding soundproofing packages for residents.
However a spokesman for the mayor said he believed the scheme would have lead to an “unacceptable increase in noise for East Londoners” without benefitting the city.
London City Airport said it was perplexed and disappointed by the Mayor of London’s direction given the scheme would deliver an additional £750m per annum to the UK economy.
Declan Collier, Chief Executive Officer of London City Airport, said: “It is ironic that the Mayor of London, whose platform has always been one of advantage for business in London, is denying the capital the business opportunity presented by growth at London City Airport.
“It is doubly ironic that this decision was taken on LCY’s busiest-ever day , when more than 16,500 passengers passed through the terminal.”