Tesco has submitted plans to redevelop its site on the Old Kent Road with a larger store and more than 350 new homes.
The plans include an expansion of the supermarket to the Tesco Extra format, providing greater choice for shoppers, as well as new community spaces and shop units for independent retailers.
The development will also provide 369 new homes above the store – fewer than the 488 homes previously announced.
"Southwark Council is leading the way in regeneration, taking forward large scale projects at the Elephant and Castle and Aylesbury Estate," says James Wiggam of Tesco.
"We believe this scheme will positively contribute towards this wider regeneration of the borough and help support programmes that are already underway. The Regeneration Partnership with the Jobcentre Plus will help achieve this by providing new opportunities for local people.
"In drawing up the plans we have undertaken extensive consultation with the local community. Over 84 per cent of people who submitted comments were fully supportive of the plans. We are delighted with this response and are committed to working closely with Southwark Council and the community as the application progresses."
Tesco says that the plans will create 200 jobs and the firm has established a regeneration partnership with the Jobcentre Plus to provide training, skills and job opportunities to long-term unemployed people in the local area.