Around 70 firefighters are battling the blaze which broke out at midday today
Around 70 firefighters in 10 fire engines are battling the blaze at the Baitul Futuh Mosque in London Road.
People attending for prayers were evacuated from the building after the ground and first floors were hit.
Shocked onlookers gathered opposite the mosque, watching a dark plume of smoke billowing out of the building's roof, before they were ushered behind a police cordon.
The cause of the fire is not known at this stage
Ambulance officials say one man has been taken to hospital with smoke inhalation but there are so far no other injuries reported.
Up to 10,000 people can fit inside the mosque but it is not known how many were in the building at the time.
Police cordoned off the mosques to keep the public away
One man was taken to hospital due to the fire in south London
It is understood up to 50 per cent of the mosque is alight.
Phil Morton, station commander for Croydon fire station, said the cause of the blaze is still unknown.
He added: "We are working very hard to control the fire but, as it's such a big building with such high ceilings, I imagine it will take a while yet.
"We are using an aerial appliance to apply water to the roof - a fire break to stop the fire spreading.
"We expect a large amount of the building to be damaged."
The fire broke out just after midday today
Baitul Futuh Mosque can hold up to 10,000 worshippers
Fire chiefs say they do not yet know how the blaze started
He added that a large proportion of the front of the building was initially ablaze and that crews had worked hard to put it out quickly.
A London Ambulance Service (LAS) spokesman said: "We treated a male, reported in be in his 40s, with smoke inhalation and took him to St George's Hospital as a priority."
Roads have been closed in the area.
Merton Police tweeted: "London Road, Morden (A24) closed Southbound due to fire. Avoid the area if you can. Closed for foreseeable future #RoadClosure."
Trains at the adjacent Morden South station were reducing in sped but passing through without stopping.
Trains are not stopping at the nearby station and many roads are closed to traffic
Merton Council leader Stephen Alambritis described the mosque as a "major landmark" in the area.
Damage to the "beautiful building" will be a "big blow" to the community, he said.
Mr Alambritis said the mosque is a very secure building, which is manned by security staff, and suggested the fire could have been caused by cooking preparations rather than an arson attack.
He said: "I know from the many times I have been there how well used and professionally it is run.
"Every time I have been there, I have been met at the doors and the people are very visible and friendly.
"I could not see how any kind of arson could take place but that is for the police and the fire brigade to investigate. I am sure that this community will want to know themselves whether there is any possible arson.
The mosque was built in 2003 and is considered the biggest in western Europe
People praying at the Baitul Futuh Mosque during a live broadcast in 2012
"It is a very beautiful building and what has happened is very sad. There were no people at prayer at the time (the fire broke out). It does seem that evacuation procedures worked.
"The congregation there, especially on a Friday, are very large and peaceful and they add very much to the community. This will be a blow to their operation but they will be back."
Labour MP for Mitcham and Morden, Siobhain McDonagh, said she was shocked by the news.
She added: "The mosque does a huge amount for the local community. They are tireless raisers of funds for charity - their own charities' funds and charities in the community.
"Their motto is 'Love for all, hatred for none' and they really live that. I have been to the mosque many times - it is a beautiful building and my heart goes out to them."Transport for London (TfL) said the A24, which feeds the busy Morden town centre, is shut both ways, northbound and southbound.
Road have been closed from Crown Road down to the mosque, which is near Morden South railway station.
The mosque was built for the Ahmadiyya Muslim community to provide people with a meeting place and somewhere to hold social religious events.
The mosque, which cost £5.5million when it was built in 2003, covers 5.2 acres.
A London Fire Bridgage spokesman said a call was made at 12.06pm.
He added: "Crews from New Malden, Wandsworth, Tooting, Sutton, Mitcham and Norbury fire stations are attending the incident.
"The cause of the fire is not known at this stage."