Half of all children in inner London live below the poverty line, the London Child Poverty Commission (LCPC) found.
The commission has called for an increase in child tax credits
It revealed 41% of the 650,000 children in Greater London also live in a household with an income of less than 60% of the national average.
The commission wants the government and employers to raise salaries and increase employment in the capital.
The LCPC said it was "hard to believe" such child poverty existed "in one of the richest cities in the world".
The LCPC is an independent body which was set up by the mayor of London and London Councils in February 2006.
Its report found that families living in social housing, single-parent families, and some black and ethnic minority groups faced higher risks of poverty.
LCPC chair Carey Oppenheim said the report identified "practical steps which can have an impact now and in the future".
"But making an impact will only work if different players - whether it is government at national, regional or local level, employers, or people working directly with families and children - act in concert," Mr Oppenheim added.
The LCPC called for the introduction of a government minister with specific responsibility for cutting child poverty in London, and for an increase in child tax credit.
It also called for employers and trade unions to help low-paid workers and immigrants to develop their careers.
Employment minister Stephen Timms said: "In our capital we believe that work is the best route out of poverty, and we have seen numbers claiming unemployment benefit down by almost 150,000 over the last decade."