The Mayor said the capital "simply can't afford to have the numbers of people who congregate" for the festive countdown and fireworks this year.
"There will not be fireworks on New Year's Eve this year, like in previous years," Mr Khan told LBC radio, adding officials were drawing up plans for a stay-at-home event instead.
If the rule of six remains in force, he added: "There will be nothing happening in [central London]. The key thing is to avoid there being a reason for people coming into town."
Last year the spectacle drew more than 100,000 people to line the banks of the River Thames, while the annual dazzling display unfolded against a curated soundtrack.
Mr Khan added: “What we are working on is to do something that people can enjoy in the comfort and safety of their living rooms on TV.
“As soon as we manage to bottom that out I’ll be letting Londoners and people across the country know.
“We can’t afford to lose that slot because New Year’s Eve is a really great opportunity for the rest of the world to see how wonderful our city is.
“Particularly during a recession we need to continue investment in our city and people coming to London.”
Ministers had denied that the new ban on gatherings of more than six people would scupper the festive season, despite surging rates of Covid-19 infections creating no end in sight for the strict curbs.
It comes as London is set to be next in line for the local lockdown rules imposed on more than 10 million Britons so far.
An Evening Standard analysis revealed the capital's number of cases per 100,000 over seven days has shot up from 18.8 to around 25. In at least a dozen boroughs, the figure is around 30 or higher.
Public health chiefs are considering bringing in restrictions for Londoners including mandatory masks and reduced social contacts, and a local lockdown if the rate rises above 50 per 100,000.
The London New Year's Eve fireworks usually attract hundreds of thousands in-person and millions of television viewers across the world, providing a £1 million boost to the capital's economy.
The event was ticketed for the first time in 2014 because of overcrowding concerns.