Developer Queensgate Bow UK Holdco applied to the west London borough last year to build a part 30-storey tower including a new 749-bed hotel, 340 serviced apartments, and 46 homes.
The plan would involve demolishing the existing high-rise Holiday Inn Kensington Forum Hotel at the site in Cromwell Road, South Kensington.
The council resolved to refuse permission for the scheme – which received hundreds of letters of objection - in September last year because members felt the proposal's "height and massing" would cause harm to the character and appearance of nearby heritage assets.
In November, the mayor wrote to the council to say he would call in the application for his own consideration, citing low housing delivery by the borough as a key reason.
He also said the proposed development "has the potential to make an important contribution to the delivery of enhanced visitor infrastructure to support London’s visitor and business economy" and would improve job opportunities for Londoners.
However, in December, the council's law director Tasnim Shawkat wrote a pre-action protocol letter to City Hall, calling on the mayor to "urgently review his decision" and revoke the direction.
According to the council, the judge ruled this week that the legal case brought by the borough against the mayor is "plainly arguable".
The challenge claims that Khan acted with "improper purpose", by failing to allow the government the opportunity to consider calling in the application following his resolution to grant planning permission subject to a legal agreement.
The council’s lead member for planning, Johnny Thalassites, said: "We are backing residents all the way, challenging a decision by the mayor to grant planning permission against the wish of the community.
"I am keen to see new developments that create jobs and generate income but they cannot come at the expense of residents, who have genuine concerns about the plans."
The application proposes a part-30, part-22 and part seven-storey building, which includes conference space and restaurants in addition to the hotel and homes. The housing would include at least 20 social rent and London Living Rent homes.
The hotel scheme was one of three London applications that Khan last December highlighted where he claimed the former housing secretary James Brokenshire had either determined, called-in or allegedly threatened to call-in.
Khan accused the government of "hypocrisy" in blocking or threatening to block the three schemes.
The judicial review will be heard on Thursday 21 November.