The hotel will have 495 pod-style rooms
A Tokyo-style 'pod hotel' will open in central London's famous tourist spot the Trocadero.
Westminster Council has given planning permission for a 495-room hotel with rooms as small as 12sq m.
It takes its inspiration from Japanese hotels which have capsules for rooms to make use of space in crowded cities.
The hotel, between the second and seventh floors of the Grade II listed building, will be ready in time for the London 2012 Olympics.
Councillor Alastair Moss, chairman of Westminster Council's planning committee, said: "The designs for this hotel are a good example that bigger does not equal better.
"Most of the 200 million people who visit the West End every year would rather go out than stay in."
He added: "The design world at present is obsessed with all things miniature and this development is in vogue."
The new hotel is one of many being built in time for the Olympics Games.
Also on the way are a 194 bedroom hotel at the Swiss Centre in Leicester Street, central London, and the transformation of the former Playboy club in Park Lane into a 48 room hotel.