The capital's mayor has decided to give the Private Finance Initiative scheme the go-ahead, after the consortium behind the project made substantial changes.
The mayor had objected to the original proposals for the hospital, located on Whitechapel Road in east London.
His office claims to have been working closely with the applicants and Tower Hamlets council in a bid to ensure substantial improvements.
'I am pleased that, following enormously hard work by the applicants, my officers and Tower Hamlets council, we have now achieved a far more successful design for the Royal London Hospital,' Livingstone said yesterday.
'The earlier plans for this site were unacceptable for London and did not meet the quality standards set out in the London Plan. The redevelopment of the Royal London will add significantly to the capacity and quality of healthcare facilities serving the City and east London.
'In a project of such a huge scale, which will impact on Londoners lives for a century and more, it is hugely important that we have got the plans right,' he added.
However, Livingstone said he still has reservations about the new scheme. He has urged the applicants to take another look at the routing of the ambulances, construction traffic and operational traffic to try to avoid residential areas.