Almost 400,000 Londoners with a disability are unemployed and in some boroughs, only one in four disabled people is working.
According to the report by the Social Market think-tank, the capital is "wasting huge opportunities" to make its economy bigger and fairer because disabled Londoners are not being fully supported into work.
The research shows that despite its world-leading economy and strong job market, London is still a very difficult place for disabled people to get work. While some boroughs have a good record of helping disabled residents into the labour market, disabled people in many boroughs have been left trailing far behind other Londoners.
The report recommends that London Mayor Sadiq Khan create a new Disability Employment Taskforce to address the problems disabled people face in finding a job in London. It also calls for a new Government drive to boost local employment rates.
The research, supported by Trust for London, shows that the employment rate for disabled people in London stands at 46.5%, meaning that around 370,000 disabled Londoners are out of work.
Overall employment in London is 85%, meaning that the capital has a "disability employment gap" of 38.5 percentage points. That rate is slightly lower than the national average of 41.5 percentage points, but it conceals big variations, including worrying figures showing that disabled people in some parts of London find it much harder to get work than others.
In Hammersmith and Fulham, the disability employment gap stands at more than 50 points and only a quarter of disabled residents are in work.
By contrast, more than 65% of disabled people in Richmond are in work, giving the borough a disability employment gap of just 20 points.
There is also troubling variation in the employment prospects of people with different sorts of disability. People with mental health problems, who make up almost a third of all disabled people in London, are most likely to be unemployed.
The SMF found a 47.5 percentage point employment gap for people with mental health conditions: fewer than one in four people disabled by mental health issues has a job. The findings show that while awareness of mental health issues has risen significantly, the economic reality for disabled people remains extremely challenging.
The scale of the employment and the wide variations in the labour market for disabled people require a "joined up" approach driven from City Hall, the SMF said.
The Mayor of London should set up a Disability Employment Taskforce, bringing together employers and disability charities with the sole aim of increasing disability employment in the Capital.
The SMF also called on central government to help support the best local responses to the employment gap. Ministers should launch a ‘Financing Future Health” fund that offers £1 billion for pilots that aim to providing better social, health and employment support for people claiming Employment Support Allowance.