Mr Khan revealed he would be investing the money into developer Pocket Living, which aims to build at least 1,059 homes by March 2021, with a third of these expected to be built offsite.
The homes will be typically one and two-bed flats for first-time buyers who live in the boroughs in which the developments are being built, with the cost of these properties 20 per cent lower than market value.
The money from the mayor will go towards financing site purchases by Pocket Living and is expected to be paid back in full within the next decade.
Pocket will be expected to deliver high-density housing on small brownfield sites across the capital and use offsite construction where appropriate to speed up delivery.
The funding will come out of the mayor’s Innovation Fund, which was created after London secured £3.15bn from the chancellor Philip Hammond to build 90,000 homes in last year’s autumn Budget.
Mr Khan said: “For decades, we have simply not built enough new and affordable homes in the capital, meaning that for too many Londoners the dream of buying their own home is getting further and further out of reach.
“That is why I am working with Pocket Living to build more than a thousand homes for first-time buyers, using the latest offsite construction techniques to provide attractive and affordable homes as quickly as possible.
“I will continue to use more of my £3.15bn of funding to invest in innovative schemes like this to build the genuinely affordable homes Londoners need.”
Pocket Living chief executive Marc Vlessing said: “City Hall’s support for Pocket is yet another demonstration of the mayor of London’s commitment to tackling the capital’s housing shortage and increasing the range of affordable housing options.”