The London Mayor launched the new scheme at the Google UK headquarters in London.
"Extremism, intolerance and hate crime of any kind has absolutely no place in our city and I have worked closely with the police and all communities across London as we battle against this scourge," said Khan.
"Sadly, we have also too often seen extremism on our streets with the horrific terror attack in London Bridge in November last year as well as homophobic, anti-Semitic and Islamophobic incidents. We know that leaving the EU will raise tensions and bring new challenges that is why it is so vital we empower our communities to help deliver change now," he said.
Rowan Barnett of Google.org said that keeping the online community safe was the group's "top priority".
"As part of this commitment, Google.org supports solutions that fight hate and extremism at a local level which help foster positive change in the UK. We believe communities and grassroots programmes are an incredibly important part of the effort to encourage collaboration, cooperation, and sensitivity across London," he said.
Organisations such as registered charities and community groups have until March 22 to pitch for funds as part of the new initiative.
They would be considered eligible if their projects satisfy some key outcomes such as directly countering the promotion of hateful, intolerant and extremist messages and content, both online and offline, or raising awareness around the issue and empowering communities in their fight against harmful content.
Khan has called on tech firms to make flagging harmful content on social media platforms easier and get it removed faster. He is also planning to create a network of civil society groups who can share best practice as they make a bid for the new funds.
The most recent UK Home Office data, released last October, found there were a record 103,379 hate crime offences in 2018-19, which is an increase of 10 per cent compared to 94,121 in 2017-18 and more than double from 42,255 since 2012-13.
While the majority of hate crimes recorded by police forces in England and Wales were racial in nature (78,991), religious hate crimes also marked a hike over the past year.
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