Freesheet distributors have been given a one-month deadline to do more to tackle the waste caused by their papers before "tough" measures are imposed.
Abandoned freesheets create four tonnes of waste a day
Westminster City Council said The London Paper, owned by Rupert Murdoch and Associated Newspapers' London Lite
made four tonnes of waste a day.
It wants the owners to sponsor 150 recycling bins and a vehicle but they have been unable to agree on costs.
The council has threatened to make it illegal to distribute freesheets.
The London Paper and London Lite have a combined daily circulation in excess of 900,000 copies.
They are often droppedon the streets in Westminster, creating an extra four tonnes of paper waste daily.
The zones most blighted by litter are around Charing Cross and Embankment stations; Leicester Square/Charing Cross Road; Oxford Circus; and Victoria station.
Under the council's proposals, a permit would be needed to distribute freesheets in these areas unless the two papers organised their own litter picking and recycling collection.
Westminster council's Alan Bradley said: "This proposal gives us the authority to forcibly tackle the issue of waste if the voluntary agreement fails."