Speaking in Brussels a day before Britain triggers the two-year Brexit process, Sadiq Khan also urged Prime Minister Theresa May to give a "cast iron" guarantee of the rights of EU citizens living in Britain.
"There is no need for the EU to send a message or to instil fear by punishing the UK," Khan told an event run by the Politico Europe newspaper.
"A bad Brexit deal that hurts London would hurt the EU too," added Khan, who is meeting key EU figures including European Parliament chief Antonio Tajani while in Brussels.
"A bad Brexit really is a lose-lose situation."
The London mayor, whose city voted overwhelmingly against Brexit in last year's referendum, called on May to set a positive tone for the Brexit talks by quickly agreeing to protect the rights of the three million EU citizens in Britain, including one million in London.
"It would be a perfect gesture of goodwill to provide a cast iron guarantee of their rights to remain in the UK," Khan said.
After meeting Khan, Tajani said that he would "work hard towards achieving a fair and orderly divorce between the European Union and the United Kingdom."
MEPs will have the final vote on any Brexit deal, and are also set to vote next week in Strasbourg on a resolution on their goals for the negotiations.
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