A London Assembly committee is urging the government for more childcare provider funding in London when it expands its free childcare provision.
From April, free childcare for children under three will be offered in England.
But a report by the economy committee has said the funding for nurseries offering free places "does not cover the cost of delivery in London".
The Department for Education (DfE) has said funding rates "reflect" varying costs around the country.
The committee added that the lack of funding would affect "the cost, quality and availability of childcare for parents and families".
As part of its work the committee also surveyed about 100 parents in the capital.
The research suggests London has the highest childcare costs in the country, with 25 hours of childcare for under twos costing 25-33% more in London than the average for the rest of Britain.
The report highlighted "clear concerns" about capacity amid extra demand for childcare caused in part by the expansion of free places.
"The expansion needs to be properly funded and implemented with input from the sector to ensure it has the capacity to address the resulting increase in demand," the committee's report said.
Another contributing factor is the soaring cost of living in the capital, which is triggering "severe staffing shortages" and "ongoing challenges related to recruitment and retention", the report said.
It added: "Research has shown that workers in the sector feel undervalued, while wages and the lack of career progression also act as a barrier to recruitment and retention."
