Work will create 500 construction jobs building an extended terminal, new aircraft taxiway and parking spaces for planes.
London City Airport will also make a number of investments in transport links around the airport, including funding the cost of additional DLR rolling stock investing in a bus and taxi access scheme and improving walking and cycle routes to the airport.
Former London mayor Boris Johnson blocked the expansion plans, which had been backed by Newham Council.
One of Sadiq Khan’s first decisions as the new Mayor of London was to lift his predecessor’s objection, which has paved the way for the government decision.
Chancellor of the Exchequer, Philip Hammond said: “London City Airport’s ambitious growth plans will boost international connections, strengthening the City of London’s links to destinations across the world, and send a clear signal that Britain is open for business.”
Transport Secretary Chris Grayling added: “These new plans for London City Airport will deliver jobs and business in the capital and more widely. Companies across the UK will be able to bid for construction and procurement contracts worth £294 million, meaning the benefits will be felt up and down the country.”