Under the proposal, both markets would operate from a new site at Albert Island, just east of London City Airport, on land earmarked for wider regeneration.
It is estimated that the move could generate about £750m in local expenditure and more than 2,200 jobs.
The proposal follows plans to move the markets to Dagenham, which were abandoned last year.
The City of London Corporation said it had since been working with market traders to identify new sites for the businesses.
The governing body’s chairman, Chris Hayward, said “progress” has been made.
“By following through on our commitment to support traders to relocate, and to ensure our plans for new housing and culture at the vacated sites come to fruition, we are laying the foundations of future economic growth across the Square Mile, London and the UK.”
Greg Lawrence, chairman of Smithfield Markets Traders’ Association, said it was a “significant step forward”.
“We’re now all keen to get cracking with the next steps,” Mr Lawrence said.
Most traders from both markets have agreed to move together to a new site, although the current markets will stay open until at least 2028, the City of London Corporation said.
It added that it had signed an agreement with the Greater London Authority to work on the proposals.
However, the move is subject to the introduction of an Act of Parliament allowing the closure of the existing markets and will require planning permission from Newham Council.