Paris, believed to be the favorite to win the 2012 Olympics sweepstakes, also won glowing praise in the crucial inspection report on the technical aspects of the five bids for the games.
London bid chairman Sebastian Coe said the London committee was "delighted" and that "a lot of hard work has paid off."
U.K. Culture Secretary Tessa Jowell said: "What today's report shows is that we have a bid that can win."
The IOC said a "high level" of planning was involved in the London bid and that it believed demands would be met in terms of transport, venues, environment and legacy.
The report said a London Games would cost $4.28 billion. The commission said "the budget is reasonable and achievable."
It added, "The Olympic Park would provide a much-needed legacy for sport to an area of London in need of regeneration."
Candidate cities Madrid and New York also gained good marks but Moscow was criticized for a lack of planning.