London City Airport has been closed after a 500kg World War Two bomb was found nearby in the River Thames.

The airport will be shut all day and all flights cancelled, affecting up to 16,000 passengers, a spokeswoman said. The bomb was found at George V Dock on Sunday during pre-planned work at the east London airport, police said.

Families in the area have been evacuated with the exclusion zone set to be widened when specialists begin removing the device.

The airport was shut at 22:00 on Sunday. The Met Police said it was working with the Royal Navy to remove the bomb.

According to the airport’s website, a total of 261 arrivals and departures were scheduled for Monday – with 130 flights having been cancelled earlier. “All flights today are cancelled but some airlines have moved their flights to other airports – CityJet to Southend and Alitalia to Stansted”, the airport said.

Passengers have been told not to travel to the airport as the terminal is closed and to contact their airline. The device is a German 500kg bomb according to specialist officers and the Royal Navy, Newham Council said.

Robert Sinclair, CEO of the airport, apologised and said: “I recognise this is causing inconvenience for our passengers, and in particular some of our local residents. “The airport is cooperating fully with the Met Police and Royal Navy and working hard to safely remove the device and resolve the situation as quickly as possible.”

Members of airport staff are on Hartmann Road, the main route to the airport, to help redirect people.

Airlines using London City Airport include British Airways, Flybe, CityJet, KLM and Lufthansa, with flights to domestic and European city destinations.

Police said a 214-metre exclusion zone had been set up and properties inside were evacuated, with Newham Council providing temporary emergency accommodation to residents.

A rest centre has been opened to provide bedding and refreshments for families that have nowhere to go. Streets affected include Holt Road, Leonard Street, Lord Street, Newland Street, Tate Road, Muir Street and Kennard Street.

When work begins to lift and remove the device, the exclusion zone will be extended to 250m and more properties will need to be evacuated, the council said. “While we endeavour to progress the operation as quickly as possible and minimise disruption, it is important that all of the necessary steps and precautions are taken to ensure it is dealt with safely,” the Met said. “We would like to thank everyone affected for their patience and cooperation.”

Police said a number of road cordons were in place and advised motorists to avoid the area.

Docklands Light Railway services between the airport and Woolwich Arsenal have also been suspended.