The unexploded ordnance was discovered in King George V Dock, during planned works near the runway of London's most central airport.
British police said the 1.5-metre (five-foot) shell was "lying in a bed of dense silt" and removing it depended on the tides.
"At this stage we estimate that the removal of the device from location will be completed by tomorrow morning," London's Metropolitan Police said in a statement.
Today's shutdown affected up to 16,000 passengers who were due to fly, although some airlines switched their flights to other London hubs.
The bomb was discovered at around 5:00am (local time) yesterday and a 214-metre exclusion zone was imposed "to ensure that the ordnance can be safely dealt with whilst limiting any risk to the public," police said.
Homes within the exclusion zone were evacuated overnight and the local authority was providing residents with temporary accommodation and support.
"Officers are assisting with a controlled evacuation of up to 500 people," the Newham Council local authority said in a statement, adding that a former town hall building had been opened up for evacuees.
It said specialist officers "have attended and confirmed it as a German 500-kilogramme fused device".
Newham Council said: "Work will not start on lifting and removing the device until the initial 214-metre zone is clear.
"When work starts to remove it, it is expected the exclusion zone will be extended to 250 metres and more properties will need to be evacuated."
City Airport operates short-haul flights and is located in east London, close to the Canary Wharf business district.
It is the capital's fifth-biggest airport.
"The airport remains closed this morning," its chief executive Robert Sinclair said earlier in the day.
"All flights in and out of London City on Monday are cancelled," he said.
"I urge any passengers due to fly today not to come to the airport and to contact their airline for further information."
London was heavily bombed during the "Blitz", the Nazi German air attacks of September 1940 to May 1941.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)