The device was found on Sunday and a cordon put up late that evening after discussions between the Royal Navy and Metropolitan Police.
Transport for London said Docklands Light Railway services will not run between Pontoon Dock and Woolwich Arsenal owing to the 214-metre (700ft) exclusion zone.
The discovery was made as survey work was carried out as part of the airport’s £480 million expansion programme. A spokesman said the device remains under water and is likely to be removed on Monday night, with the aim of reopening the airport on Tuesday.
Newham Council said the bomb has been confirmed as a “German 500kg fused device”, adding that the operation to move it is expected to continue until Tuesday morning.
Robert Sinclair, CEO of London City Airport said: “The airport remains closed this morning following the discovery of a World War Two ordnance in King George V Dock on Sunday.
“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.
“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 Met Police spokesman said: “The ordnance was discovered as part of pre-planned work at London City Airport and reported to the police at 5.06am on Sunday.
At 10pm an operational decision was made with the Royal Navy to implement a 214-metre exclusion zone to ensure that the ordnance can be safely dealt with whilst limiting any risk to the public.
“There will also be disruption to inbound and outbound flights during the operation.
“London City Airport are urging passengers to contact their airline before travelling.”
Transport for London tweeted the airport was shut and road closures were in place.
The transport authority wrote: “The airport has been closed due to an emergency services incident.
“There are also additional local road closures due to the incident. Traffic is light in the area.”
London City Airport is the 14th busiest in the UK with 4,540,000 passengers in 2017, according to data from the Civil Aviation Authority.
A Newham Council statement said: “The council has opened its Borough Emergency Control Centre. Officers are assisting with a controlled evacuation of people in this exclusion area. Affected at this stage are parts of Holt Road, Leonard Street, Lord Street, Newland Street, Tate Road, Muir Street and Kennard Street. Some residents have chosen to remain in their homes and others have made arrangements to stay with friends or family. A rest centre has been opened and Transport for London are ferrying people to it
“Work will not start on lifting and removing the device until the initial 214-metre zone is clear. When work starts to remove it, it is expected the exclusion zone will be extended to 250 metres and more properties will need to be evacuated.