If approved, Oxford St would join other major shopping hubs such as Times Square in New York and La Rambla in Barcelona that have gone fully traffic-free.
A previous version of the plan to ban vehicles from the 1.9km thoroughfare was blocked by the local Westminster City Council, but the revived project has received backing from Britain's Deputy Prime Minister Angela Rayner.
Rayner said the plan would drive growth, create new jobs and generate economic activity.
"The difference this time is, I've got the support of central government, and that means if ... there was opposition from the council, we'd have the powers to proceed with good plans," Khan told Reuters.
Oxford St attracts around half a million visitors every day, according to the mayor's office, but many flagship stores including House of Fraser and Topshop have shut in recent years.
The area, like many bricks-and-mortar shops, has struggled to recover footfall since the Covid-19 pandemic saw many people turn to online shopping and fewer return to the office.
The New West End company, which represents retailers on Oxford St, said the area remained key for retail and hospitality in London.
Some retailers welcomed the move. John Lewis, whose flagship store has been on Oxford St since 1864, called the nearly three-century old highway the "nation's high street".
Khan said the plan was to get rid off all traffic, including bicycles, in the one-mile stretch from Oxford Circus to Marble Arch. The London mayor's office has not specified how buses that use the east-west road would be rerouted.
Stuart Love, chief executive of the local Westminster City Council, said the authority wanted more details on how concerns of local residents and shoppers over rerouted transport and access would be addressed.
Ron Harold-Hurst, a pensioner from Bromley, southeast London, said he was against pedestrianising the street.
"It's a terrible idea," the 83-year-old said. "You need buses don't you? How are you going to get from one end to the other?"
The plan needs final approval from Rayner, who is also Britain's housing and communities minister.
British Prime Minister Keir Starmer's Labour Party has said it wants to accelerate the process of approving projects to speed up Britain's economic growth.
