More than a million of the 2.2m people in poverty come from a family where at least one person works.
While joblessness in the capital is at its lowest since 2008, the charity Trust for London said the fall had not cut poverty.
Nearly a fifth of jobs pay less than the London Living Wage.
Low wages and high housing costs mean 37% of the capital's children now live in a family in poverty.
But the report also said London children on free school meals did better in GCSEs than their peers in the rest of England.
London's Poverty Profile (pdf), which is compiled by the New Policy Institute, looked at the effects of the housing boom and how London had recovered from the recession.
While the number of pensioners in poverty has fallen by 30% in the last decade, both housing and work have become more insecure, with more families in temporary or private rented accommodation.
The average private rent in London is now Â£1,600 a month, more than double the average for England.
In 2014/15 London had 7,500 rough sleepers, the highest figure ever recorded.
Hannah Aldridge, one of the report's authors, said:  "When people talk about 'generation rent', they normally think of young working adults unable to save a deposit. But the 260,000 children growing up in private rented poverty are at the sharp end of London's housing crisis, living in expensive, often low-quality homes without long-term security."
A government spokesperson said that the introduction of a national living wage and an increase in the personal tax allowance would raise working families' incomes.
"Our affordable house-building efforts have exceeded ambitions and delivered more than 260,000 affordable homes, 35,000 of which have been built in London."
A quarter of London's 8.6m people live in poverty, the majority of them in working families, according to a new report.