The unexploded device was discovered early on Sunday morning in the King George V Dock that borders both sides of the runway at the east London airport.
Airport chief executive Robert Sinclair said: “All flights in and out of London City on Monday are cancelled and an exclusion zone is in place in the immediate area. I urge any passengers due to fly today not to come to the airport and to contact their airline for further information.”
He added: “I recognise this is causing inconvenience for our passengers, and in particular some of our local residents. The airport is cooperating fully with the Met Police and Royal Navy and working hard to safely remove the device and resolve the situation as quickly as possible.”
A total of 261 arrivals and departures were scheduled for Monday. British Airways has rebooked passengers on flights from Heathrow and Gatwick.
A BA spokesperson added: “We are doing everything possible to minimise disruption for our customers following the closure of London City airport.
“We are rebooking customers due to travel today onto alternative flights or offering refunds for those who no longer wish to travel.”