By March, 3,000 of the capital’s 8,900 buses will use B20 green diesel, which is blended with waste from the meat industry.
Animal fat and cooking oil are among the ingredients that will be churned into the bus fuel.
The buses are all owned by Stagecoach and Metroline, while the diesel will be supplied by Argent Energy.
More than 640 buses already run on the modified fuel as part of a two-month trial.
Deputy Mayor for environment and energy Matthew Pencharz said the development would “slash the overall carbon emissions of the fleet and make use of fuels that would otherwise be clogging up our drains”.
He added: “These buses will be a proud addition to what is already the greenest bus fleet in the world, including hybrid, pure electric and pure hydrogen vehicles.
“We will continue to work with our industry partners to use more of London’s used cooking oil turned into biodiesel right here in the city, creating green jobs and fuel self-sufficiency benefits.”
TfL’s buses director Mike Weston said: “This improvement, which will reduce CO2 emissions by 21,000 tonnes each year, is being introduced now with no extra spend needed and no long delay for the fitting of new kit.”
Argent’s development director Dickon Posnett said he hoped other cities would follow London’s cue and start using the B20 blend in buses.
TfL’s Ultra Low Emission Zone plan means all 300 single decker buses operating in central London must be electric or hydrogen-powered by 2010.
All 3,100 double decker buses must be hybrids by the same date.