The councillor who was inspired by Jeremy Corbyn to defect from the Liberal Democrats to Labour past year is backing Owen Smith for the party's leadership.
Corbyn, 67, is favourite and retains the backing of most trade unions and many grassroots supporters who signed up previous year to propel him to a shock leadership election win.
As he came out in support of Smith, Khan highlighted Corbyn's lacklustre attempt to keep Britain in the European Union in the June 23 referendum, saying he had "totally failed" to get his message across.
While he is opposed by a majority of Labour's MPs, Corbyn's candidacy has been endorsed not only by 84% local constituencies but also the two largest trade unions, Unison and Unite, as well as smaller unions such as the train drivers' representatives Aslef and from Young Labour, while Smith has been endorsed by the GMB, the third largest union, and several other smaller unions, as well as the Labour Movement for Europe.
"Across the country today Labour party members and supporters are receiving their ballot papers and on that ballot paper is a very fundamental question: who can lead the UK Labour party and who is best placed to form the next Labour government?"
He said that sometimes those administrations "hid away from our principles" and believed that "what matters is what works".
"What works can not trump what is right", he added.
Mr Corbyn has pledged to introduce new "collective and individual" rights in the workplace if he succeeded in becoming prime minister.
Corbyn has the support of many Labour members, and since February 2015 party membership has surged from 200,000 to 540,000.
An estimated 640,000 people will be able to vote in the contest.
The endorsement of Smith by Khan who became London Mayor in May has slightly boosted Smiths chances of becoming Labour Leader, as William Hill predicts that the MP for Pontypridd has only an 18% chance of winning the party leadership.
However, he received a setback earlier this month when a court ruled that 130,000 new party members who joined in the six months up to July 12 could not vote in the leadership contest.
Supporters of Corbyn also booed Khan after he was mentioned on the stage at a rally in London.
Supporters of Jeremy Corbyn have furiously dismissed the latest criticisms of the Labour leader from senior party figures.
"Jeremy has already proved that he is unable to organise an effective team and has failed to win the trust and respect of the British people".
A YouGov poll conducted last week gave the ruling Conservatives 38 percent support among voters compared to 30 percent for Labour and 13 percent for the anti-EU UK Independence Party.
Ms Dugdale accused Jeremy Corbyn of speaking "only to the converted" and said Mr Smith can unite the party and win the next General Election.