The plans – which are being publicly consulted on until 17th December 2017 – will create new traffic-free public spaces.
The mayor of London unveiled the proposals with Cllr Robert Davis, the deputy leader of Westminster City Council.
The changes include restricting east-west traffic from entering Oxford Street between Orchard Street and Oxford Circus, and the raising of the carriageway to be level with the existing pavements.
New seating would be provided, and an 800m-long work of public art could also be commissioned for the length of the former carriageway.
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If accepted, the first-stage scheme will aim to be delivered to coincide with the launch of the Elizabeth line (Crossrail) in December 2018.
Mr Khan said: “This is a hugely exciting moment for the capital.
“Oxford Street is world famous with millions of visitors every year, and in just over a year the iconic part of the street west of Oxford Circus could be transformed into a traffic-free pedestrian boulevard.
“Whether you’re a local resident, a business or shop in some of the area’s famous stores, our plans will make the area substantially cleaner and safer for everyone, creating one of the finest public spaces in the world.”
The plans included investing in wider pavements, improved pedestrian crossings, more taxi ranks and new cycling infrastructure.