The plans include the demolition of the former Wimbledon greyhound track and replacing it with a new 20,000-seat stadium, homes and a fitness club.
The decision follows a 14-day consultation, in which the public was asked to comment on the application and the options available to the Mayor, which ended on 10 August.
The application has now been handed back to Merton Council to determine.
The Mayor of London, Sadiq Khan, said: “I have taken the time to consult local residents, businesses and other interested parties and, having weighed up all of the evidence available to me, I’m confident the stadium and the leisure facility proposed alongside it will be of great benefit to Londoners and the wider community for generations to come. As such, I have decided to return the application to the local council to determine itself."